Natural Gas Fundamental Forecast – September 8, 2016

October Natural Gas sellers may be taking a break early Wednesday after a substantial four day sell-off. The range was tight early Wednesday with the futures contract closing at $2.730, up $0.013 or +0.48%. The current price action suggests that sellers may be peeling back the huge weather-driven rally that was fueled recently by hurricane activity in the Gulf of Mexico.

Based on the current chart pattern and when the market started to react to rig shutdowns as the storm developed, it looks as if the prices are likely to return to the $2.70 level before traders start to pay closer attention to the traditional supply and demand fundamentals.

Besides the return to normal production levels, prices have been feeling pressure this week on expectations that cooler weather would reduce demand for the fuel. Weather forecasts on Tuesday called for cooler temperatures in the next six to 10 days, following hot weather in the eastern U.S. in the coming week.

Today’s early tight range may be a sign that the market is going through a transition period as traders square positions ahead of the quick burst of hot temperatures. However, once this weather blows over, seasonal tendencies are likely to kick in, signaling a resumption of the sell-off.

Currently, the market is oversupplied and there are very few catalysts to drive prices higher between now and late October, so the strategy to follow is to sell rallies. Gas stockpiles tend to increase through the end of October, as producers store the fuel ahead of the winter heating season, when demand is typically highest.

If you’re patient, you may get the opportunity to short a rally today or tomorrow. If you’re not then you’ll be encouraged to sell weakness. Big money is likely on the short side at this time since natural gas inventories are likely to end the injection season at record levels.

NATURAL GAS WEATHER

Sept 6-13th: High pressure will dominate the southern and eastern US with temperatures warming into the upper 80s to lower 90s, including across major cities from Chicago to NYC by mid-week.

Hermine continues to bring showers and gusty winds to the Northeast Coast but tracking away from the US Wednesday. Showers and cooler temperatures over the western US will spread to the north-central US mid-week, and then across the Great Lakes and Mid-Atlantic this weekend.

Most importantly, with warm upper level high pressure strengthening east of the Rockies, natural gas demand will return to stronger than normal levels. Overall, natural gas demand will be high this week with the southern and eastern US warming above normal.

FxEmpire provides in-depth analysis for each asset we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports, which covers the current week and are published by Sunday before the new week begins. Daily we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole.

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)