Natural Gas Fundamental Forecast – August 23. 2016

Natural Gas gained 47 points to 2.631 as summer temperatures continue and short term forecasts call for a warmed than expected Labor Day holiday extending air conditioning demand. Natural gas futures continued to advance in today’s session, gaining 1.04% with a settlement at $2.617 per million BTU. Unlike Friday and Monday, when the contract closed well off the best levels of the day, today’s close was near the high of the session, suggesting more sustained buying interest. However, the contract still has not made a great deal of progress from the lower boundary of a downward sloping trend channel dating to the early July high, keeping the trend of the contract firmly to the downside despite the recent recovery rally.

Sentiment on the cooling fuel improved after weather forecasting models showed that the weather will probably be hotter than normal in the Mid-Atlantic and Great Lakes region through August 26. Demand for natural gas tends to rise in the summer months as warmer temperatures increase the need for gas-fired electricity to power air conditioning. Natural gas futures lost 6.7% last week amid speculation that August heat won’t prevent stockpiles from reaching a record before the winter. Total U.S. natural gas storage stood at 3.317 trillion cubic feet, according to the U.S. Energy Information Administration, 10.9% higher than levels at this time a year ago and 13.3% above the five-year average for this time of year.

Natural Gas Weekly Weather Outlook (www.natgasweather.com)

Aug 19 – Aug 25: It remains warm over the East Coast where highs into the upper 80s and lower 90s again expected into major cities, while also warming across the Great Lakes the next few days as high pressure briefly builds in. It’s hot over the West with upper 80s to 100s, apart from the coast. Most importantly, an early season cool blast with showers and thunderstorms is currently advancing into the northern Rockies and Plains, dropping temperatures into the 60s and 70s behind the cool front, which is several degrees below normal. Next week will remain slightly cool over the central US, but very warm to hot over the West and East Coasts, especially late in the week. Overall, nat gas demand will be MODERATE the next 7-days.

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