MTECHTIPS

MTECHTIPS:-Natural Gas: Barclays revises Q4 price forecast from $3/MMBtu to $3.35

Barclays is revising their Q4 price forecast for natural gas from $3/MMBtu to $3.35/MMBtu.“Notice our Q4 price forecast remains well below where the curve is now, as we believe the market is still not pricing in the latent supply that could render more production than anticipated, while the incremental loss of coal displacement due to higher gas prices will also reduce power demand.” the Bank said in a report.Natural gas prices remain dislocated from market fundamentals, despite making some corrections last Wednesday. The market finished Thursday with prices gaining one to two pennies across the curve despite a bearish storage injection, which was 5 Bcf higher than the market’s expectations.For the week ending on 28 September, storage added 77 Bcf, with the West injecting 8 Bcf and the East, 42 Bcf. The Producing region added 27 Bcf. The storage overhang fell by 3.43 Bcf/d y/y. However, most of the incremental tightening is due to higher y/y heating demand and nuclear outages, while y/y coal displacement is only down to about 1 Bcf/d, compared with the peak at 6 Bcf/d y/y reached in the spring.Although some of the latent supply appears to be delayed into Q4 rather than materialising in September, it remains a large upside risk for natural gas production that could bearishly surprise the market in the next few months.