Natural Gas Price Fundamental Weekly Forecast – OPEC Producer Group Collapse to Have Negative Impact on Prices

We could see the final nail in the coffin of this year’s heating season struck this week with the spread of the coronavirus contributing to the bearish price action as well as forecasts calling for widespread mild temperatures and relatively low demand.

Expectations of sharply lower crude oil prices should also be a drag on natural gas prices as that market tries to first find value then form a support base in the wake of OPEC+’s inability to come to an agreement on production cuts.

Last week, May Natural Gas settled at $1.748, up 0.016 or +0.92%.

Coronavirus Impact

Natural gas prices could feel further downside pressure after OPEC and its allies, led by Russia, failed to reach an agreement to reduce production, thereby, collapsing the deal that had been in place for four years.  A plunge in crude oil prices combined with a supply glut and mild weather is likely to keep a lid on natural gas prices while putting them in a position to hover near multi-year lows.

U.S. Energy Information Administration Weekly Storage Report

The EIA reported Thursday that domestic supplies of natural gas fell by 109 billion cubic feet for the week-ended February 28. A Reuters poll showed a withdrawal of 108 Bcf for the week-ended February 28, while a Wall Street Journal survey showed a 109 Bcf pull. Bloomberg estimated a median withdrawal of 110 Bcf. NGI’s model predicted a 106 Bcf withdrawal.

Last year, EIA recorded a 152 Bcf withdrawal for the similar week, and the five-year average pull of 106 Bcf.

Total stocks now stand at 2.091 trillion cubic feet, up 680 billion cubic feet from a year ago, and 176 billion cubic feet above the five-year average, the government said.

Short-Term Weather Outlook

NatGasWeather for March 9 -15 says, “This week will bring mild conditions across the northern US with highs of 40s to 60s. The exception is the Northern Plains with 30s as cold shots over Canada provide glancing blows. The southern US will be warm with highs of 60s to 80s, although with scattered showers. The West will see a mix of cool weather systems and mild breaks but mostly with highs of 40s to 70s. A stronger cold shot will push into the central and northern US next weekend with lows of 0s to 30s for a modest increase in demand after being very light before then.

Weekly Forecast

The impact of increased production from OPEC and its allies, combined with global oil demand loss related to coronavirus and expectations of low demand due to mild weather, should keep the pressure on natural gas prices.

The downside momentum created by the combination of bearish news events should be enough drive the market through its recent bottom at $1.642 and closer to the psychological $1.500 level.