Natural Gas Price Fundamental Weekly Forecast – Supported by Scorching Heat, Low Storage Injection Hopes

Natural gas futures edged higher last week but well off its highs as traders assessed the impact of Russia’s decision to trim gas supplied to Europe and a slight shift in mid-month weather forecasts against the possibility of a shortage of natural gas at the start of the U.S. heating season.

Last week, September natural gas futures settled at $8.229, up $0.034 or +0.41%. This is down from the weekly high at $9.419.

The price action suggests that this week’s direction is likely to be determined by the mid-month forecast. Prices could rise if the forecasts point toward above-average cooling demand.

Natural Gas Intelligence (NGI) said, “Robust cooling demand fueled strong advances for physical prices on Monday and Tuesday. Prices pulled back the next couple days ahead of forecasts that called for easing summer heat over the weekend, but that was not enough to offset the early surges.”

Europe Needs US Liquefied Natural Gas to Meet Energy Needs

Russia again cut gas flows to Europe through the Nord Stream 1 pipeline during the past week – from 40% to only 20% of capacity. Russia’s action punctuated supply worries in Europe and amplified the likelihood that the continent will for the foreseeable future need U.S. liquefied natural gas (LNG) to meet its energy needs, analysts said.

Temperatures Ease Before Heat Returns

Bespoke Weather Services said domestic demand was projected to ease modestly over the final weekend of July with moderating northern temperatures. Still, demand was expected to mount anew and prove robust deep into August.

“The weather forecast has remained largely unchanged over the last three days now, still solidly in hot mode” heading into the first half of August, the firm said. It sees the potential for some gas-weighted degree days (GWDD) in the first third of August.

US Energy Information Administration Weekly Storage Report

The U.S. Energy Information Administration reported on Thursday that domestic natural-gas supplies rose by 15 billion cubic feet for the week ended July 22. That compared to an average forecast for an increase of 25 billion cubic feet from analysts polled by S&P Global Community Insights.

In the comparable week last year, the EIA printed an injection of 38 Bcf, while the five-year average injection is 32 Bcf.

Total working gas stocks in storage stand at 2.416 trillion cubic feet, down 293 billion cubic feet from a year ago and 345 billion cubic feet below the five-year average, the government said.

Weekly Forecast

Given the current forecasts predicting hotter temperatures by mid-month, the bias remains to the upside. The current price action suggests buyers may be eyeing a pullback into support at $7.372 to $6.888 for their next entry.

EBW Analytics Group analyst Eli Rubin said on Friday, “Scorching heat and low storage injections are likely for at least the next three weekly storage reports. Our updated storage trajectory suggests that the storage deficit versus the five-year average could climb 2.0 Bcf/d over the next three reports to reach 387 Bcf.”

That’s bullish news that could carry over into the winter heating season.