Natural Gas Price Fundamental Weekly Forecast – Focus May Shift from Global Shortage to Improving US Supply
Natural gas futures finished lower for the week after reaching a multi-year higher on Thursday. Traders said the volatile price action was fueled by soaring prices in Europe and Asia, a bearish government storage report and forecasts calling for milder temperatures into the end of the month. Traders seemed to shrug off the global price spike late in the week because supply conditions were improving in the United States.
Last week, December natural gas futures settled at $5.710, down $0.053 or -0.92%.
Weekly Weather Outlook
Bespoke Weather Services said given the warmth in the 15-day outlook, October is on track to rival 2016 for the lowest demand seen in any October in its historical dataset that dates back to 1980. “The only chill in the pattern over the next couple of weeks is focused out in the interior West, with the eastern half of the nation very, very warm.”
Bespoke analysts expect the low-demand pattern to continue into late month – if not all the way into at least the start of November – because of the prevailing La Nina base state. Wind has also started to pick up after being at very low levels in recent days. This would likely impact gas power burns for the next several days.
The mild weather pattern – already with several weeks under its belt – has vastly improved the once perilous storage situation in the Lower 48.
NatGasWeather Weekly Forecast
According to NatGasWeather for October 11 to October 17, “A weather system with valley rains and mountain snows will stall over the West with cool highs of 40s to 60s, lows of 20s to 40s.
A second milder system will exit the Plains and track towards the Great Lakes mid-week with showers and highs of 60s and 70s. The rest of the U.S. will be nice to warm this week with highs of 60s to 80s besides locally hotter 90s in the far southern U.S.
A cooler trending system will sweep across the Midwest next weekend with highs of 50-60s, although still nice to warm over most of the rest of the central, southern, and eastern U.S.
Overall, national demand will be low to very low into the foreseeable future.”
US Energy Information Administration Weekly Storage Report
The U.S. Energy Information Administration (EIA) reported on Thursday that domestic supplies of natural gas rose by 118 billion cubic feet (Bcf) for the week ended October 1. That was larger than the average increase of 111 Bcf forecast by analysts polled by S&P Global Platts.
Total stocks now stand at 3.288 trillion cubic feet (Tcf), down 532 Bcf from a year ago and 176 Bcf below the five-year average, the government said.
Weekly Forecast
Most of the recent strength in the market has been tied to the rise in global markets. This may change this week with traders likely to follow the U.S. weather patterns more closely.
There is still plenty of upside risk due to the global situation, but the improving U.S. storage outlook is likely to put a lid on natural gas futures prices this week. We’re not recommending putting on short-positions but we could see a near-term pullback into support areas.
The first potential support zone is $5.736 to $5.534, followed by $5.269 to $4.956.
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This article was originally posted on FX Empire
