Natural Gas Price Fundamental Weekly Forecast – Light Shoulder-Season Demand Expected

Natural gas futures finished the week lower, but a two day reversal to end the week helped ease the pain for those on the wrong side of the market. At the same time, the unexpected reversal put an end to a 12 day losing streak, however, it’s way too early to suggest an early winter bottom is in, given the lackluster demand and strong production growth.

For the week, November natural gas futures settled at $2.352, down $0.052 or -2.16%.

Short-Term Weather Outlook (7 Day)

According to NatGasWeather for October 4 to October 10, “Strong high pressure will dominate the South & East into Saturday with highs of 80s to lower 90s for strong late season demand. Mild to chilly conditions continue across the northern US with lows dropping into the 20s to 40s for modest early season heating demand. Fresh cooling will spread across the Midwest and Northeast early next week with lows of upper 30s to 40s. Across the southern US, high pressure will ease late in the weekend through next week with mostly comfortable highs of 70s and 80s besides the hotter Southwest. Overall, demand will be dropping to moderate-low late this weekend through next week.”

Mid-Term Weather Outlook (11-15 Days)

Bespoke Weather Services said on Friday, “Models showed hints that another push of colder air could come into the eastern United States at the end of the 11- to 15-day period, preventing the outlook from being bearish.”

“At this time, we are not expecting to see demand rise to the same levels as we saw starting in the middle of October last year,” Bespoke chief meteorologist Brian Lovern said.

NatGasWeather added, “The data is struggling with exactly how much cold air will arrive with this system, but the data has added demand since the start of the week.”

U.S. Energy Information Administration Weekly Storage Report

On Thursday, the EIA reported a 112 Bcf injection into storage inventories for the week-ending September 27.

Last year, the EIA reported a 91 Bcf injection, and the five-year average stands at 83 Bcf.

Total stocks now stand at 3.317 trillion cubic feet, up 465 billion cubic feet from a year ago, but 18 billion below the five-year average, the government said.

Weekly Forecast

Temporarily oversold conditions as evidenced by the short-covering rally following Thursday’s bearish government storage report could create a choppy, two-sided trade this week if bullish counter-trend traders continue their clash with bearish fundamental traders.

However, the bears are likely to eventually win the battle given the risks of light shoulder-season demand, robust production growth and the healthy storage situation.

Technically, the first resistance area is $2.368 to $2.440. The second resistance area comes in at $2.476 to $2.539. The best resistance area is $2.440 to $2.476.