Natural Gas Price Fundamental Daily Forecast – Bearish Due to Divergence in American, European Weather Models

Natural gas futures are edging higher early Wednesday after a steep drop the previous session. On Tuesday, traders ignored reports of lower production with sellers taking control on the back of uncertain weather forecasts.

Cash markets were lower in anticipation of comfortable temperatures. American weather models are predicting progressively warmer temperatures in some parts of the United States, but the European model continues to lag so traders aren’t certain about the intensity of the expected heat wave.

At 07:14 GMT, August natural gas futures are trading $2.314, up $0.002 or +0.09%.

NatGasWeather said, “The European model still shows a warmer U.S. pattern arriving, but there’s enough of a difference between it and the Global Forecast System (GFS) to give the markets pause before believing the hottest scenario.”

Short-Term Weather Outlook

NatGasWeather predicts for June 18 to June 24, “A messy pattern continues across the country with numerous weak weather systems/fronts producing scattered showers and thunderstorms. It will be comfortable across most of the northern and interior US with 70s and 80s, while very warm to hot around the periphery with 80s to 100s for the West, 80s and 90s across Texas, the South, and Southeast, and very warm up the Mid-Atlantic Coast with 80s to 90s. This weekend will bring a cool shot to the Rockies, while next week will bring strengthening high pressure across the southern 2/3 of the US with increasing coverage of hot 90s and 100s. Overall, demand will be low increasing to moderate this weekend and next week.”

Daily Forecast

The main trend is down. Despite trying to build a support base for nearly two weeks, August natural gas posted a new low for the month on Tuesday.

The new short-term range is $2.413 to $2.300. Its 50% level at $2.356 is the first upside target. Taking out $2.413 will change the main trend to up.

On the downside, there is no clear support at this time.

Fundamentally, traders are gearing up for another triple digit build in Thursday’s government storage report, according to the early estimates. However, the main concern for traders is the divergence in the European and American weather models.

The American model sees a heat wave coming, but the European model does not. We’re not likely to see the start of a sustained rally until both models are in sync.