Natural Gas Price Fundamental Daily Forecast – Prices Pressured by Weak Long Profit-Taking
Natural gas futures are easing lower on Wednesday after ending its five-day winning streak the previous session. After surging to a multi-month high earlier in the week, prices dropped sharply on profit-taking, weaker cash prices and a drop in LNG export volumes. Helping to underpin the market are forecasts calling for increased cooling demand and a lower than average storage build in Thursday’s government report.
At 12:23 GMT, September natural gas futures are trading $3.206, down $0.038 or -1.17%.
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Short-Term Bearish Fundamentals
Natural Gas Intelligence (NGI) said the NGI Spot Gas National Average fell 13.5 cents to $3.190 on Tuesday after gaining 26.5 cents a day earlier.
NatGasWeather said profit-taking likely also factored in notably after strong gains.
Meanwhile, Liquefied natural gas (LNG) levels, which hovered near record levels above 11 Bcf most of the spring, have proven choppy in June amid annual maintenance work at export facilities. That has continued this week.
LNG volumes fell back below 10 Bcf on Tuesday, according to NGI data. At the same time, the National Hurricane Center (NHC) said it was tracking a weather system causing disorganized showers and thunderstorms over the Bay of Campeche in southern Mexico that could affect LNG shipping. The systems could cause LNG cargo delays, adding to maintenance interruptions, NatGasWeather said. The system may dampen cooling demand later this week in states along the Gulf Coast as well.
NatGasWeather also said, “The system could also bring minor production disruptions in the Gulf of Mexico, but overall it’s more likely to bring stronger bearish impacts versus bullish” in terms of natural gas prices, the firm added. “Impacts are likely to be the loss of demand from clouds and showers, as well as the potential to delay LNG cargoes and bring heavy squalls to LNG facilities.
Potentially Bullish TETCO Development
Last Friday, prices surged after the Texas Eastern Transmission Co (TETCO) system said that a 20% pressure reduction in its pipeline that began this month could last until late in the third quarter. This could keep the natural gas market undersupplied through March 2022. “If production gains prove insufficient to balance the market gas prices are likely to continue rising to reduce price-sensitive demand,” EBW Analytics Group analysts said.
Daily Forecast
Looking ahead to Thursday’s government storage report, analysts are looking for a relatively modest increase.
Technically, the September natural gas futures contract is currently testing its first support level at $3.198. If it fails to hold then look for the selling to possibly extend into another support zone at $3.146 to $3.093. Since the main trend is up, buyers could start coming back in on a test of this area.
The market could be under pressure until some of the weaker longs are taken out. The weather forecasts remain bullish, but clearly bullish traders would like to get some clarity from TETCO about the length of the pipeline delay and stronger demand for LNG.