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Natural Gas Price Fundamental Daily Forecast – Technical Factors Underpinning Prices

By:
James Hyerczyk
Published: May 15, 2020, 10:08 UTC

The U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas rose by 103 billion cubic feet for the week ended May 8.

Natural Gas

Natural gas futures are edging higher on Friday, supported by technical buying due to oversold conditions, and a government storage report that fell slightly short of expectations. Spot prices, however, remained negative across most of the country with Natural Gas Intelligence’s (NGI) National Average down 6.5 cents to $1.415.

Thursday’s rebound was a bit of a surprise, but Bespoke Weather Services said, “…without material tightening, any rally likely gets sold into.”

At 09:43 GMT, July natural gas is trading $1.906, up $0.022 or +1.17%.

Bespoke:  Another Hotter Summer

NGI reported that analysts at Bespoke said low weather-related demand is likely to persist the next couple of weeks as any remnants of winter quickly dissipate and extreme heat remains at bay. Toward the end of the month, warmth could return to the West as global atmospheric signals indicate the pattern is not yet moving into La Nina mode, “although we still expect that transition to occur as we move through the summer season, which is part of the reasoning for expecting another hotter summer this year for the nation as a whole.”

Short-Term Weather Outlook

According to NatGasWeather for May 15-21, “The northern US will be mostly comfortable with highs of 60s to lower 80s. The southern U.S. will be very warm with highs of 80s to lower 90s, but with areas of showers across Texas and the South to prevent extreme heat from building. The West Coast will see several weather systems track onshore over the next week for relatively mild highs of 50s to 70s. Overall, light national demand as the northern U.S. becomes mostly comfortable and the southern U.S. very warm, but not quite hot enough.”

US Energy Information Administration Weekly Storage Report

The U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas rose by 103 billion cubic feet for the week ended May 8. That compared with an estimated increase of 101 billion cubic feet from S&P Global Platts Analytics.

Total stocks now stand at 2.422 trillion cubic feet, up 799 billion cubic feet from a year ago, and 413 billion cubic feet above the five-year average, the government said.

Daily Forecast

The price action the last two sessions indicates that investors are defending the two main bottoms at $1.825 and $1.802.

The daily chart suggests there is room to the upside with a potential target zone $2.101 to $2.163, but in order to get there, buyers are going to need more than “technically oversold conditions” to trigger a short-covering rally. Especially since the bears are likely to sell rallies.

Additionally, with the International Energy Agency (IEA) saying global natural gas demand is on track to drop by a record 5% in 2020 due to the economic impacts of Covid-19, any rally is going to have to be fueled by aggressive production cuts, or a leveling of demand due to an easing of lockdowns and restrictions.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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