Natural Gas Price Fundamental Weekly Forecast – Gains Capped as Hopes for Mid-Month Cold Fade

Natural gas futures eked out a small gain last week as traders bet early in the week on cooler mid-month temperatures. Traders gave back more than half of its weekly gains, however, ahead of the weekend, making it essentially rangebound for the week.

Freezing overnight temperatures hit parts of the Northern Plains and Upper Midwest early in the week, but they were offset by mild temperatures in much of the South and West. This was enough to limit strong national heating demand.

Last week, December natural gas futures settled at $5.516, up $0.090 or +1.66%.

US Energy Information Administration Weekly Storage Report

The U.S. Energy Information Administration reported on Thursday that domestic supplies of natural gas rose by 63 billion cubic feet (Bcf) for the week ended October 29. That was below the average increase of 70 Bcf forecast by analysts polled by S&P Global Platts.

Total stocks now stand at 3.611 trillion cubic feet (Tcf), down 313 Bcf from a year ago and 101 Bcf below the five-year average, the government said.

Weekly Weather Forecast

According to NatGasWeather for November 8-12, “National demand will ease to very light levels this week as high pressure with comfortable highs of 50s to 80s expands across the eastern 2/3 of the U.S.

The West will be cool and unsettled as Pacific weather systems track inland with valley rain and mountain snow with highs of 40s to 60s.

A chilly weather system will drop out of southwest Canada and across the Midwest Thursday-Friday with rain, snow, and lows of 10s to 30s, then tracking into the East next weekend for an increase in national demand.

Overall, national demand will be low through Friday, then moderate next weekend.”

Weekly Outlook

We could be in for a choppy trade this week according to the analysts at NatGasWeather.

The firm said Friday that both the domestic and European weather models were “bouncing between cooler and warmer trends” for mid-month. But forecasts pointed to gradually cooler temperatures by late November. This combined with expectations for strong winter demand for U.S. exports, was enough to energize bulls and support futures, Natural Gas Intelligence (NGI) reported.

NGI also reported that analyst James Bevan of Criterion Research said the U.S. market is on pace to emerge from the depths of the 2021-22 winter next March with 1.4 Tcf of gas in storage – signaling sufficient supplies – but that outlook was based on normal winter weather expectations.

An exceptionally cold U.S. winter, combined with robust demand for American exports, could force utilities to burn through supplies more substantially, he said.

It looks like the chilly mid-month forecast has come and gone. This could keep a lid on prices but it won’t necessarily turn the market bearish. Traders are going to start gradually shifting toward the month-end forecasts. At this time it calls for colder temperatures.