Natural Gas Price Fundamental Weekly Forecast – Demand Could Plunge as Coronavirus Forces Businesses to Close

Natural gas prices could feel selling pressure this week on renewed concerns over demand. It’s not likely to be lower demand from the weather, but rather lower demand from expectations of a weaker economy due to the coronavirus pandemic outbreak.

Overnight the Fed made another emergency move to provide liquidity for the economy, but stock market investors failed to react positively. This suggests that they believe the Fed hit the panic button for the second time in less than two weeks, and that the economy may be in worse shape than previously expected.

Coronavirus Shutdowns Could Impact Demand

Analysts at Genscape, Inc. said they’re operating with a baseline assumption that natural gas demand impacts from efforts to contain the outbreak could resemble the impact of the weekend reductions in consumption, Natural Gas Intelligence (NGI) reported.

“At present, it appears that the coronavirus-triggered precautions are compelling more employees to work from home, closing some businesses and shutting schools, trends common to weekends,” Genscape senior natural gas analyst Rick Margolin said. “Generally speaking, the ‘weekend effect’ lops demand by about 7% compared to mid-week levels. Since 2014, the effect in March is actually smaller, about a 4% drop versus weekdays.”

Natural Gas Intelligence also reported that Genscape estimates show this would mean a roughly 3 Bcf/d decline in demand for March. For April, the impact of week-end like conditions would mean a 5 Bcf/d drop compared to weekday levels, and for May this would be a 5.6 Bcf/d drop-off.

“The actual impact, though, could likely be greater than a standard weekend effect as some businesses retreat from even baseline operations, businesses that do normally operate during weekend are removed from the stack; large-gathering energy-drawing events like sporting matches and conferences are canceled; and the fact that this doesn’t account for any potential recessionary impacts,” according to Margolin.

Short-Term Weather Outlook

According to NatGasWeather for March 16-22, “National demand will be strong to open the week after a chilly start to much of the country Monday with lows of 0s to 30s besides the milder South/SE. There will be numerous weather systems bringing showers this week, although with warm conditions returning to dominate most of the country Tuesday-Friday with highs of 50s to 80s besides the West Coast and far North for a return to light natural demand. A strong cold shot will push into the central and northern US next weekend with lows of 0s to 30s for a swing back to strong national demand.”