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Natural Gas Fundamental Forecast – August 26, 2016

By:
Barry Norman
Published: Aug 25, 2016, 10:50 UTC

Natural Gas dipped 11 points to trade at 2.785 as traders wait for the weekly inventory report.  Various factors led to consistently below-average US

Natural Gas Fundamental Forecast – August 26, 2016

Natural Gas dipped 11 points to trade at 2.785 as traders wait for the weekly inventory report.  Various factors led to consistently below-average US natural gas storage injections this summer, which promoted a rally in futures prices but leaves questions about the changing seasons. While price action has been clearly strong this week, market internals continue to call into question the sustainability of the rally. Specifically, open interest increased 0.57% during last Friday’s pullback and has been on the decline so far this week. Open interest fell nearly 2% during Monday’s advance and declined another 1% during Tuesday’s rally. Typically, falling open interest in a market rally is a sign of liquidations driving the move, rather than new buying. Data for today’s advance will be available when the inventory is released.

Open interest increased more than 7% from August 4th through August 11th, as natural gas declined 10%. It could be that the unwinding of these short positions is helping fuel the move higher in natural gas. Thus, once enough shorts have exited, the advance could lose momentum. As a result, whether the contract can extend the rally and produce a sustained breakout from the downward sloping price channel appears open to question. In addition, price moment indicators are now at fully overbought levels suggesting the increased potential for at least a temporary pullback in the near term.

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

Aug 24 – Aug 30: High pressure will strengthen into the East Coast through the end of the week with temperatures warming back into the upper 80s to lower 90. Although, it’s expected to remain unsettled over the west-central US into Texas through the weekend as weather systems bring showers, thunderstorms, and modest cooling. With warm upper level high pressure strengthening east of the Rockies into next week, nat gas demand will increase from moderate early week levels back too high. Finally, a tropical system tracking toward the Caribbean will approach the US late this weekend. Overall, nat gas demand will be MODERATE the next 2 days and then back to HIGH.

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WEEKLY

Natural Gas Weekly Update
Release Schedule: Thursday between 2:00 and 2:30 p.m. (Eastern Time)

Weekly Natural Gas Storage Report
Release Schedule: Thursday at 10:30 (Eastern Time) (schedule)

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