Natural Gas Fundamental Forecast – August 31. 2016

Natural Gas rallied as traders took advantage of the low prices to buy up the commodity as weather forecasts call for a warmer later autumn season. There are hopes of a lower inventory after a drop last week. Prices have failed to rally significantly this season as NG is expected to trade around 3.20 in its off season between summer and winter. US natural gas futures hit a 2016 high of $2.99 per MMBtu on July 1, 2016. On August 25, 2016, prices were down by 5% from their 2016 highs. Prices are up by 12.8% YTD (year-to-date). In the last three months, prices are up by 21.3% due to expectations of a hot summer, short covering, and traders watching for possible impacts from La Niña.

As a result of that rally, the contract broke above the upper boundary of the downward sloping trend channel that had defined price action since the early July peak was established. The breakout above the upper channel line and subsequent follow through left resistance at the late July/early August highs at $2.885/$2.911 in play, and this zone is currently capping upside price action.

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

Aug 26 -Sept 1st: High pressure will dominate the southern and eastern US through next week with temperatures mainly in the upper 80s to lower 90s. Although, it’s expected to remain unsettled over the west-central US into the Midwest through the weekend as weather systems bring showers, thunderstorms, and modest cooling. With warm upper level high pressure strengthening east of the Rockies, nat gas demand will remain stronger than normal. Finally, a tropical system over the Bahamas will approach the eastern Gulf of Mexico this weekend. Overall, nat gas demand will be MODERATE becoming HIGH.

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