Natural Gas Price Fundamental Weekly Forecast – Potential for Triple-Digit Storage Build

Natural gas futures finished slightly lower last week and inside the previous week’s range. This suggests investor indecision and impending volatility. Keeping a lid on prices were rising storage levels and the anticipation of even larger weekly storage builds in the weeks ahead. The mixed weather forecasts provided both support and resistance at times.

Last week, June natural gas futures settled at $2.704, down $0.002 or -0.07%.

Lower cash prices also weighed on futures prices. The current cold system hitting the northern and central United States didn’t do much to sway the trade in either direction. Low heating demand and relatively insignificant cooling demand are likely to lead to a significant improvement in the storage picture with production expected to continue to be steady while facility maintenance continues. Despite the bearish indicators, some support is being provided by an increase in liquefied natural gas exports.

U.S. Energy Information Administration Weekly Storage Report

According to the EIA, natural gas in U.S. storage facilities increased 25 Bcf to 1.155 Tcf in the week-ending April 5. The injection was smaller than the consensus estimates, which called for a 33 Bcf injection.

However, the actual injection of 29 Bcf was trimmed due to an EIA reclassification of working gas stocks comprising about 1 Bcf in the Pacific region and around 2 Bcf in the South Central salt-dome facilities.

Nonetheless, the build was still bearish compared with a 20 Bcf withdrawal reported in the corresponding week in 2018 as well as the five-year average injection of 5 Bcf, according to EIA data.

As a result, stocks were 183 Bcf, or 13.7%, under the year-ago level of 1.338 Tcf and 485 Bcf, or 29.6%, below the five-year average of 1.640 Tcf.

Short-term Weather Outlook

NatGasWeather for April 12-April 18 says, “A strong spring storm will exit the Midwest but with chilly conditions left in its wake with lows of 20s and 30s. The southern US will be very warm with highs of 70s to 90s, while mild over the West Coast with mostly 50s to 70s, coolest over the wetter Northwest. Another cool shot will sweep across the northern and central US this weekend into early next week with another round of lows of 20s and 30s for stronger national demand. A mild break between cold shots will set up late next week over the Great Lakes, Ohio Valley, and East with 60s & 70s. Overall, national demand will be moderate to locally high.”

Weekly Forecast

June Natural Gas could continue to trade sideways-to-lower at the start of the week due to stable weather conditions and cash market weakness. If there is any volatility it will be fueled by a major shift in the weather forecast, or a major surprise in the weekly EIA storage report.

According to Bespoke Weather Services, “It is quite difficult for colder weather to have as much impact once to late April, however, unless we see an extreme event, which at this time is looking quite unlikely.”

“Continued loose balances point to another hefty injection versus the five-year average next week as well,” according to Bespoke. On Wednesday, Tudor, Pickering, Holt & Co. said there was a potential for the EIA to report a 100 Bcf-plus build, which would be five times the five-year average. Most analysts, however, are estimating a build closer to around 90 Bcf.