Natural Gas Price Fundamental Daily Forecast – Supported by Forecast for Cold Temps Until Nov. 18

Natural gas futures are trading higher on Friday shortly before the regular session opening. Traders are shrugging off yesterday’s government report which showed a larger-than-expected storage injection. The move proves that traders are not paying attention to past data, but looking forward to future demand due to weather concerns.

At 0945 GMT, December Natural Gas futures are trading $3.581, up $0.038 or +1.07%.

To recap Thursday’s events, the market posted its third two-sided trade since Monday’s gap-higher opening, however, it held up relatively well, given the release of a government report that showed a larger-than-expected weekly storage build.

Prices were likely underpinned by higher prices in the spot market as the middle third of the country prepared for the return of extremely cold temperatures. According to NGI, the spot gas national average climbed 7.5 cents.

U.S. Energy Information Administration (EIA) Report

On Thursday, the EIA reported a 65 Bcf injection in its weekly U.S. natural gas storage report for the week-ending November 2. This was on the high side of the consensus figure which came in at 58 Bcf.

Total stocks now stand at 3.208 trillion cubic feet, down 580 billion cubic feet from a year ago, and 621 billion below the five-year average, the government said.

Short-Term Weather Outlook

According to NatGasWeather.com for the period November 9 to November 15, “Cold air will continue to spread across the Great Lakes and east-central U.S. today, including into portions of Texas and the South. Lows behind the cold front will reach the teens to 30’s, locally single digits. The East will be mild again today with highs mostly of 50s to 70s, but cooling this weekend into the 30s to near 50F. The southern U.S. will be mild to warm with highs of upper 40s to 60s, locally 70s. California and the Southwest will be warm with highs of 60s to 80s, while colder over the interior West. Overall, demand will be high, locally very high.”

Forecast

The early price action indicates that investors are looking at future demand and not the stale EIA data. Prices are expected to remain underpinned as long as the forecast calling for cold temperatures through November 17-18 remains intact.

All eyes are on November 17-18 because there are new forecasts calling for milder temperatures setting up November 19-22. The December Natural Gas futures contract is also likely to get most of its support from the cash market.

Our target area is $3.600 to $3.680. Given the current heightened volatility, these targets are reasonable. Sellers could come in on a test of this area if the current forecast remains intact, or if the cold weather ends earlier than expected. Demand should also return to closer than normal if the forecast for more seasonal temperatures for November 19-22 remains intact.