Natural Gas Fundamental Forecast – July 27, 2016

Natural Gas fell 37 points to 2.675 as traders booked profits after demand for gas soared on the unusual HEAT BALLON that engulfed the US. Demand for the energy commodity continues to soar but production remains high pressuring prices. Natural gas prices rallied aggressively in the spring and summer, and while a spring rally is somewhat typical, so is a late-summer correction. Natural gas’s spring rally came after the commodity fell to a 17-year low in late winter, after a mild winter meant there was little demand for the commodity to generate electricity and heat homes. But, in spring and summer as the weather in North America started to heat up, demand for the commodity improved and speculators poured back into the market, not wanting to miss their opportunity to buy at a low price.

The latest weather forecasting models suggest that temperatures will be hotter than normal between July 21 and July 27 in the central, southern, and eastern US. Cities like Chicago and New York will also experience extremely hot weather over the weekend. However, moderate temperatures should be experienced in the western and northwestern parts of the US next week.

Around 50% of US households use natural gas for heating and cooling. Hot summer weather drives the demand for gas-fired electricity generation to power air conditioning. The rise in demand impacts inventories. We’ll learn more about US natural gas inventories in the next part of this series.

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

July 22 – July 28: Hot high pressure will dominate much of the US through the weekend with widespread 90s to 100s, including all of Texas. Hot and humid conditions will combine to increase the Heat Index to dangerous levels over large portions of the central, southern, and eastern US the next several days, including into major cities to drive very strong nat gas demand. Over the West, weather systems will keep conditions slightly cool over the NW, but still hot over California and the SW. Early next week, temperatures will moderate north-central US as weather systems over southern Canada arrive. Overall, nat gas demand will be HIGH to VERY HIGH the next 7-days.

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