Natural Gas Monthly Forecast – July 2017

It was a tight month of trading in natural gas with the prices being pulled this way and that but finally the end result was the fact that the prices did not move much and ended up in a consolidation and ranging mode for the month. The entire range for the month was only around 25 cents but this was not due to lack of liquidity or volatility. It was a measure of the confusion and the uncertainty in the markets that led the prices to move around aimlessly during the month of June.

Natural Gas Prices Consolidate

We have mentioned many times over the last few months that the prices of natural gas are highly dependent on the weather, especially over the US. The US is one of the largest producers and consumers of natural gas and its usage varies in the cold and the hot months. With some parts of the US having extremes of temperature during the course of the year, the usage of natural gas is also high in the US for this reason. Natural gas is used for heating purposes mainly and it is also used in various industries as well. With this in mind, it can be easily reasoned that the demand for natural gas is likely to be high in countries that have harsh winter and hot summer as well. This is the reason why the demand for natural gas is highly seasonal and dependent on the weather.

Over the month of June, we saw the weather forecasts twist and turn during the month as some forecasts predicted hot days in the upcoming weeks while some predicted cold weather while the actual weather was something in between. This made the job of forecasting the demand very difficult and this was one of the reasons for the choppiness in the prices of natural gas during June.

The other reason was of course the production and inventory of natural gas and even in this case, the data kept fluctuating in different weeks and this affected the natural gas prices in both ways. What should ultimately encourage the bulls is the fact that the prices managed to close the month on a bullish note, based on several forecasts that predicted warm weather in the upcoming days in the US and the natural gas prices closed the month just above $3.

Natural Gas Prices Likely to Move Higher

Looking ahead to the coming month, it is expected that the first half of the month is likely to be cool in many parts of the US and so we can expect the natural gas prices to be under pressure during this point of time. When the weather becomes cooler, the demand for natural gas wanes and this is a normal effect that the weather has on the gas demand. With the drop in demand, we can expect some lower prices but we also expect the lows from last month, which comes in around $2.8 to hold the prices for the near future.

For now, the second half of July is predicted to have some warm weather and this is likely to support the natural gas prices. Also, regular traders of natural gas would also know that it is in the upcoming months that the demand for natural gas usually rises, as the warm weather begins to set in, and so we believe that the bulls in natural gas are likely to keep the prices supported and keep buying the gas contracts in anticipation of a bull run in the medium term. Traders of natural gas would be well advised to keep one eye on the weather outlook in the US and other countries where the gas demand is high and look out for warm weather and on the other hand, they should also keep an eye on the inventory of gas and the fundamentals that affect the production of natural gas so that they have a total price of the natural gas market before they begin to trade.