Natural Gas Price Fundamental Daily Forecast – Whipsaw Trade as Low Stock Build Offsets Freeport LNG Outage

Natural gas futures are trading nearly flat at the mid-session on Thursday shortly after the release of the government’s weekly storage report.

Earlier in the session, futures were down about 7% to a near three-week low on expectations the fire and explosion that shut the Freeport liquefied natural gas (LNG) export plant in Texas on Wednesday will free up gas to help refill low U.S. stockpiles.

At 15:33 GMT, August natural gas futures are trading $8.674, down $0.005 or -0.06%. The United States Natural Gas Fund ETF (USO) is at $29.35, down $0.06 or -0.20%.

Energy Information Administration Weekly Storage Report

The U.S. Energy Information Administration (EIA) said utilities added 97 Bcf of gas to storage during the week-ended June 3. Traders said the build was slightly smaller than usual because power generators burned more gas last week to keep air conditioners humming during a heatwave.

Natural Gas Intelligence (NGI) wrote, “Ahead of the EIA report, the median of 12 estimates submitted to Bloomberg as of early Thursday was a 98 Bcf injection, with build estimates ranging from 85 Bcf to 104 Bcf. Reuters polled 14 analysts, whose estimates were as high as 109 Bcf. That poll showed a median increase of 94 Bcf. A Wall Street Journal poll produced an average build of 97 Bcf.

Total working gas in storage was 1,999 Bcf as of June 3, which is 398 Bcf below year-earlier levels and 340 Bcf below the five-year average, according to the EIA.

Volatility Ahead as Traders Assess Damage from Texas LNG Export Terminal Explosion

Today’s whip-saw action and recovery from the early morning plunge could become the norm over the next few sessions as traders assess the impact from an explosion at a major U.S. LNG export terminal. Prices are down nearly 7% on Thursday after dropping 6% the previous session. The sell-off had wiped out this month’s gains.

Freeport LNG said its export plant in Texas will remain shut for at least three weeks following the explosion, raising the risk of global gas shortages especially in Europe. But shortages of LNG around the world means more gas will remain in the United States, giving utilities a chance to rapidly rebuild extremely low stockpiles.

The U.S. storage was currently about 15%, or 337 Bcf, below normal levels for this time of year, its lowest since April 2019.

Daily Forecast

Technically speaking, support is a retracement zone at $8.076 to $7.706. This area stopped the selling earlier today at $8.022. On the upside, resistance is $8.834 to $9.025. The market is currently testing this area.

Buyers could re-establish the uptrend on a sustained move over $9.025. However, a trade under $7.706 could trigger the start of another steep decline.

Last week’s close was $8.510. A close under this level on Friday will be a sign of weakness.

Keep in mind that the overall fundamentals are bullish, especially the weather. So rather than expect the start of a steep decline, bullish traders are likely to be looking for new points of entry.