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Natural Gas Price Fundamental Daily Forecast – New Shorts Enter Market, Supported by Rising Production, Favorable Weather

James Hyerczyk

Natural gas futures tumbled on Monday as weak weather-related demand encouraged short-sellers to press prices lower and lingering speculative longs to aggressively exit losing positions. Traders also continued to react to last week’s bearish weekly government storage report, while ignoring a jump in spot prices caused by a forecast for unusually hot temperatures at the start of the week.

On Monday, November natural gas settled at $2.330, down 0.074 or -3.08%.

Production Gains Weighing on Prices

Genscape revised higher its estimate of Lower 48 dry gas production to 92.32 Bcf/d for Friday, putting output back above the 92 Bcf/d mark for the first time in nearly a month.

“Production continued to hover around the 92 Bcf/d level through the weekend,” Genscape senior natural gas analyst Rick Margolin said. “Since Friday, production has been averaging more than 1.17 Bcf/d above the month-to-date average before Friday.”

Short-Term Weather Outlook

According to NatGasWeather for September 30 to October 5:  Unseasonably strong high pressure will dominate the southern and eastern US the next several days with very warm to hot highs of 80s to 90s. It will be hottest from Texas to the Southeast for relatively strong late season demand. Chilly temperatures have arrived across much of the West with lows dropping into the 20s to 40s for modest early season heating demand. Fresh cooling will spread across the northern US late in the week with lows of 30s and 40s including into the Northeast. Overall, stronger national demand this week versus last week due to a stronger mix of heating and cooling needs.

U.S. Energy Information Administration Weekly Storage Report

Last Thursday, the U.S. Energy Information Administration (EIA) reported a larger-than-expected weekly injection into U.S. natural gas stocks, topping even the highest estimates.

The EIA reported that domestic supplies of natural gas rose by 102 billion cubic feet for the week ended September 20.

Traders were looking for the EIA report to show an injection in the upper 80s or low 90s Bcf for the week-ending September 20.

A year ago the EIA reported a 51 Bcf build. The five-year average is a 74 Bcf injection.

Total stocks now stand at 3.205 trillion cubic feet, up 444 billion cubic feet from a year ago, but 47 billion below the five-year average, the government said.

Daily November Natural Gas

Daily Forecast

A bearish chart pattern, supply outlook and weather forecast are expected to continue to exert pressure on November natural gas futures on Tuesday.

The main trend is down according to the daily swing chart. The main range is $2.185 to $2.745. The market settled on the bearish side of its 50% to 61.8% retracement zone at $2.440 to $2.368, putting it in a weak position. The daily chart suggests we could see an acceleration to the downside since there is no visible support until $2.185. On the upside, the nearest resistance is $2.368.

Traders are saying that supply is rising and that the next few reports should reveal whether last week’s bearish EIA surprise was a one-and-done or part of a bearish trend.

According to the National Weather Service (NWS), “A large temperature range is expected across the continental United States into Wednesday as an upper-level troughing dominates in the West, and upper-level ridging builds across the East.”

“Underneath the trough, daytime highs could be 20-30 degrees or more below average much of the Northwest…Meanwhile, east of the Rockies, temperatures will be much above average,” the NWS said.

This article was originally posted on FX Empire