Natural Gas Price Fundamental Daily Forecast – Bearish Bias On Sustained Move Under $2.769

Natural gas futures posted a wide range on Tuesday before closing lower. The volatility was fueled by the battle between bullish traders who believe the market will have trouble closing the supply deficit and bearish investors who feel increased production and low demand will be enough to take care of the deficit.

On Tuesday, June Natural Gas futures settled at $2.732, down $0.009 or -0.33%.

Forecast

Since weather is in focus at this time, let’s take a look at two outlooks at mid-week.

National Weather Service forecasts for both the six-to-10-day and eight-to-14-day periods show above-average temperatures enveloping nearly the entire US, confining the scope of average temperatures to a small patch of the Rockies into the Midwest in the shorter-range view and a few areas of Texas further out.

NatGasWeather.com for the period May 8-14 says, “High pressure will dominate most of the country this week with very comfortable spring conditions where highs will reach the 70s to mid-80s. There will be exceptions to the hotter side over the Southwest into Texas where 90s to 100s will be found, while cooler across the north-central U.S. where a weak weather system will bring showers and highs of 60s to lower 70s. A stronger weather system will track into the central U.S. this weekend but still with a mostly comfortable U.S. pattern and highs of 70s and 80s and low demand.”

Looking ahead to Thursday’s U.S. Energy Information Administration’s weekly storage report, traders expect to see an increase of about 89 billion cubic feet (bcf) for the week ended May 4. That compares with a build of 62 bcf in the preceding week, an increase of 45 bcf a year earlier and a five-year average of 75 bcf.

Total natural gas in storage currently stands at 1.343 trillion cubic feet (tcf), according to the EIA. That figure is 903 bcf, or around 40.2%, lower than levels at this time a year ago, and 534 bcf, or roughly 28.4%, below the five-year average for this time of year.

Prices could be under pressure going into the EIA report on Thursday because of a couple of factors. Firstly, the weather forecasts indicate weak demand, and secondly, increasing production implied by a steadily rising rig count, will feed expectations of additional builds to storage after the one month delay in the start of the injection season.

The key level to watch on the chart is $2.769. This price is controlling the direction of the natural gas market. The bias will be bearish as long as prices remain below this level.