Natural Gas Price Fundamental Weekly Forecast – Prices Rise Amid Strong Cooling Demand, Rising LNG Exports

Natural gas futures surged to a two-year high last week on forecasts calling for the sweltering heat in the western states to continue with increased cooling demand expected to spread to other key areas. Meanwhile, revived export demand is likely to tighten balances even further as the U.S. approaches peak cooling season.

Last week, September natural gas futures settled at $3.500, up $0.278 or +8.63%.

Bullish Weather Outlook

According to Natural Gas Intelligence (NGI), “Sizzling temperatures baked much of the West and South Friday ahead of an expected weekend heat wave in the Pacific Northwest that threatened to overtax power grids. Utilities braced for residents and businesses across Washington, Oregon and neighboring states to crank up air conditioners to endure a rare rash of triple-digit highs across the region.”

Bespoke Weather Services added on Friday, “Despite a ‘weak spot’ for temperature deviations versus normal in the middle of the nation into Texas, national gas-weighted degree days are on track to approach record levels over the final days of June and into early next month.”

“All the while,” the forecaster added, “the West remains super-hot, with all-time records set to fall in the next few days…We continue to forecast a hotter overall July as well, as the same pattern looks to prevail, with a northern focus on heat.”

LNG Demand Outlook Also Looking Bullish

NGI also reported that “liquefied natural gas (LNG) gathered further momentum Friday as well. After dropping below 10 Bcf on several days in the first half of June because of maintenance work at export facilities, feed gas volumes approached 11 Bcf on Friday. With maintenance work winding down and demand from U.S. export destinations in Asia and Europe elevated following a cold start to 2021 that depleted stockpiles, LNG levels are expected to hover near 11 Bcf or higher most of the summer.”

Energy Information Administration Weekly Storage Report

The latest EIA report confirmed the stronger demand with a modest 55 Bcf injection into storage.

Total working gas in storage as of June 18 stood at 2,482 Bcf, which is 513 Bcf below last year and 154 Bcf below the five-year average, according to the EIA.

Daily Forecast

Bullish traders are already pricing in hot conditions two-weeks in the future. National demand was forecast to temporarily ease in early July. However, it was also expected to increase again July 4-10, “as upper high pressure strengthens over the southern and eastern U.S., while becoming warm to very warm over the northern tier,” NatGasWeather said. “What also makes the coming pattern bullish is there remains solid potential for above normal temperatures to continue over much of the U.S. through the second week of July.”

“Well into the first half of July,” the forecaster said, “the western, southern, and eastern portions of the United States will be very warm to hot with highs of mid-80s to 100s for strong demand.”

Prices are likely to continue to rise until the two-week outlook is fully-priced in. Any bearish changes to the forecast on a day-to-day basis could cause some short-term volatility but I don’t expect them to be trend changing events, but rather potential buying opportunities.