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Natural Gas Price Fundamental Daily Forecast

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October 17th, 2018

Natural gas prices are trading firm early Wednesday, supported by forecasts for cooler temperatures in several key demand areas. However, gains are being limited by reports of high production and general uncertainty ahead of this week’s U.S. Energy Information Administration’s weekly storage report on Thursday.

At 0839 GMT, December Natural Gas is trading $3.319, up $0.018 or +0.55%.

Yesterday’s two-sided price action was fueled by offsetting U.S. temperature forecasts. According to the latest data from the National Weather Service, much of the Midwest, Northeast and Southern regions of the U.S. are forecast to experience below-average temperatures. At the same time, warmer-than-average temperatures are in the forecast for the Rockies, Northwest and Southwest regions. The forecasts are driving up both gas-fired power burn and heating demand.

Over the next two weeks, demand is estimated to decline slightly and average 80 Bcf/d as power burn and residential and commercial demand weaken, according to Platts Analytics.

Platts Analytics is also estimating that production will rise over the next two weeks and average 83.1 Bcf/d as shoulder season maintenance projects wind down.

In October so far, output averaged 83.4 Bcf/d, up nearly 10 Bcf from year-ago levels of 73.6 Bcf/d.

The current short-term range is $3.409 to $3.202. Its mid-point is $3.306. This price is controlling the short-term direction of the market.

A trade through $3.409 will signal a resumption of the uptrend. A trade through $3.202 will change the main trend to down.

Unless the forecasts call for extreme cold temperatures or an extended cold spell, the $3.409 top will be hard to exceed at this time. If you recall, this top was put in last week during the height of the hurricane scare.

At the same time, unless we see a large jump in production or injections, the bottom at $3.202 is likely to remain intact over the near-term.

Therefore, I have to conclude that we’re likely to see a sideways trade with the market straddling the pivot at $3.306 most of the session.

Thursday’s EIA report is expected to show an injection of 85 Bcf.


See Also: Crude Oil, Natural Gas, Heating Oil, Unleaded Gas, Ethanol, Gasoline Blendstock