September 22, 2021

Natural Gas Price Fundamental Weekly Forecast

Natural Gas Price Fundamental Weekly Forecast

Natural gas futures finished lower last week after a failing to follow-through to the upside following a test of a multi-month high early in the week. Mixed fundamentals were behind the volatile price action. It wasn’t necessarily bearish news that capped prices, but rather dampened bullish news.

Last Friday, September natural gas futures settled at $3.222, down $0.079 or -2.39%.

Weekly cash prices were higher amid scorching temperatures and strong cooling demand across much of the western Lower 48, highlighted by whopping surges in California, according to Natural Gas Intelligence (NGI).

Reuters reported that power and natural gas prices in Texas and California spiked last week to their highest levels in months as homes and businesses cranked up air conditioners to escape brutal heatwaves.

Early in the week, prices were also bolstered on news from Enbridge’s Texas Eastern Transmission (TETCO) pipeline that a recent flow restriction enforced by the Pipeline and Hazardous Material Safety Administration (PHMSA) will continue through the end of summer.

After the initial thrust to the upside, prices retreated and remained under pressure until the close on Friday as weather forecasts for the week ahead shifted cooler and a storm in the Gulf of Mexico (GOM) threatened to curb demand. Meanwhile, a record reclassification that altered the latest government inventory report, confused traders, forcing some to the sidelines and weighing on prices.

Energy Information Administration Weekly Storage Report

The EIA reported Thursday that domestic supplies of natural gas rose by 16 billion cubic feet for the week-ended June 11. The EIA said the data, however, included an adjustment to the week’s total to account for a reclassification of some gas stocks from working gas to base gas. Working gas is the volume of gas available in the market. The “implied flow for the week is an increase of 67 Bcf to working gas stocks,” the EIA said.

The EIA announced an implied build of 67 Bcf for the week, a few ticks below median estimates, but the reclassification created a huge headline miss that drove some traders to the sidelines.

Ahead of the report, analysts were looking for a lighter-than-usual storage injection with yesterday’s EIA inventory report. NGI’s model predicted a 74 Bcf injection for this week’s report. Last year EIA recorded an 86 Bcf build for the similar week, and the five-year average is an injection of 87 Bcf.

Total stocks now stand at 2.427 trillion cubic feet (Tcf), down 453 Bcf from a year ago and 126 Bcf below the five-year average, the government said.

Weekly Weather Outlook

The American and European weather models showed a pattern for Tuesday through Friday of the coming week “not quite hot enough,” one that could result in “only moderate national demand,” according to NatGasWeather.

National demand will ease in the final full week of June, the forecaster added, “as weather systems track across the northern and east-central U.S.” However, substantial heat is still expected over the Southwest, while a drought in California could continue to minimize hydropower and put upward pressure on gas demand.

Weekly Forecast

Looking ahead to this week, early estimates call for a modest build that reflects the intense heat cooking the western United States in June, according to NGI.

Bespoke Weather Services estimated a 72 Bcf injection for the week-ended June 18; the five-year average is 83 Bcf. “We remain on pace for a high-end hot June overall, ranking in the top five hottest in the historical record,” the firm said.

Forecasters, however, said cooling needs could ease some this week – after two weeks of elevated demand, NGI wrote.

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