Natural Gas Price Fundamental Weekly Forecast – Strong Production, Mild Weather Forecasts Capping Gains

With prices at historically low levels for this time of year, the market could turn higher rather quickly if a lingering cold snap emerges, but that’s a big “IF”.
James Hyerczyk
Natural Gas

Natural gas futures finished sharply lower last week and in a position to challenge the summer bottom at $2.135. The selling pressure was primarily driven by another large storage build, lower spot gas prices and weather models showing weaker demand in the 15-day forecast. Specifically, Permian Basin production growth exerted the most pressure on prices.

Last week, December natural gas settled at $2.457, down 0.067 or -2.65%.

Permian Basis Production

According to reports, Kinder Morgan’s Gulf Coast Express unleashed huge volume into the market. With little demand to soak up the deluge of supply, prices collapsed from $1.00 earlier in the week to as low as 10 cents on Friday.

Production Overwhelms the Market

“Each day this week finished with declines at the front of the curve and since September 10, there have been four positive day/day changes for the prompt-month contract,” Mobius Risk Group said. “While it is reasonable to view the market as ‘oversold’, a change in weather model output (cooler Northern tier) may be needed before momentum changes.”

U.S. Energy Information Administration Weekly Storage Report

The EIA reported last Thursday that domestic supplies of natural gas rose by 98 billion cubic feet for the week-ended October 4. Trader estimates ranged from an 80 Bcf injection to a 107 Bcf injection.

The EIA reported a 91 Bcf build for the same week last year, and the five-year average stood at 89 Bcf.

Total stocks now stand at 3.415 trillion cubic feet, up 472 billion cubic feet from a year ago, but 9 billion below the five-year average.

Mid-Term Weather Forecast

The latest weather outlooks are starting to hint at the return of cold, teasing a chillier pattern trying to push into the northern United States to close out October, but with more evidence needed, according to NatGasWeather.

“It’s possible the natural gas markets notice a few heating degree days being added overnight, but more importantly could notice the latest data trying to hint at a colder air into the northern United States October 25-30. Clearly, the onus is on widespread cold arriving and lasting if weather sentiment is to be considered bullish, but the data took a small step in that direction.”

Weekly Forecast

Over the past few weeks, we’re seen bursts of heating demand, but the rallies have fizzled as rising production continues to put a cap on prices while threatening to take out summer lows.

“The key remains late October/early November weather. No clear signal has yet emerged. Until this changes, price movements may be small,” EBW said.

With prices at historically low levels for this time of year, the market could turn higher rather quickly if a lingering cold snap emerges, but that’s a big “IF”.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US