May 5, 2020

Natural Gas Price Fundamental Daily Forecast

Natural Gas Price Fundamental Daily Forecast

Natural gas futures are trading higher on Tuesday shortly after the regular session opening. Earlier in the session, buyers took out three main tops at $2.100, $2.104 and $2.108, driving the market to its highest level since January 17.

The catalysts behind the spike in prices were lingering colder weather and a sustained drop in production. Spot prices were also higher with cooler weather moving across the northern United States and pockets of heat in the Southwest and Texas. Natural Gas Intelligence’s Spot Gas National (NGI) Average shot up 19.0 cents to $1.710.

At 12:49 GMT, June natural gas futures are trading $2.083, up $0.090 or +4.52%.

Short-Term Weather Outlook

According to NatGasWeather for May 4 to May 10, “Weather systems with showers and cooling will sweep across the northern U.S. with highs of 40s to 60s. The Southwest into Texas will be hot Monday with highs of 90s, while warm over the South and Southeast with 80s. Cooler air will push into Texas, the South, and Southeast as the week progresses, dropping highs to the perfect 70s and 80s. The Southwest will be hot with 90-100s, while mild to warm over the rest of the West with 60s to 80s. Overall, moderate heating demand northern U.S., but lighter cooling demand in Texas and the South after Monday.”

US Energy Information Administration Weekly Storage Report

Today’s EIA storage report is expected to come in near the five-year average of 74 Bcf.

NGI reports that a Bloomberg survey of six analysts produced a range of 64 Bcf to 76 Bcf, with a median of 71 Bcf. A Reuters poll of 17 market participants had injections ranging from 59 Bcf to 80 Bcf. NGI also modeled an 80 Bcf build. Last year, the EIA recorded a 114 Bcf injection.

Daily Forecast

A combination of cooler temperatures and lower production is sparking today’s rally. Whether the move lasts will be determined by Thursday’s U.S. Energy Information Administration report. It is expected to start a string of triple-digit storage injections that potentially could add 1.1 Tcf to inventories by the end of June, nearly doubling the storage plus versus the five-year average, according to NGI.

If this pattern verifies over the next few weeks, the front-month contract is likely to decline significantly,” EBW Analytics Group.

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