Natural Gas Price Fundamental Daily Forecast – Bearish Hedge Funds Betting on Improving Weather, Large Injections

Natural gas futures are trading slightly lower on Tuesday after an exhaustive break the previous session. The downside momentum has put the market in a position to challenge its low for the year at $2.623. A trade through this level is likely to lead to a further break into a pair of bottoms at $2.578 and $2.574.

At 12:07 GMT, June natural gas is trading $2.632, down $0.001 or -0.04%.

The catalyst behind Monday’s steep decline was a dramatic shift in the weather forecasts. Prices were even pressured by a drop in the spot market.

Cooler temperatures are expected to linger just one more day then after Tuesday, a warm front was expected to move into the Great Lakes, Ohio Valley and East, with rising temperatures into the 60s and 70s, expected to dampen demand into Friday, according to NatGasWeather.

Weather in the southern U.S. is also expected to improve with highs forecast for the 70s and 90s. NatGasWeather also said that weekend weather models trended much warmer and now indicate a rather bearish U.S. pattern through the end of April.

Short-Term Weather Outlook

According to NatGasWeather for April 16 to April 22, “A weather system will exit the Northeast today with rain and snow showers ending. A warm break will follow Wednesday to Friday over the Great Lakes, Ohio Valley, and East with highs of 60 & 70s. The southern US will be warm with highs of 70s to 90s, while unsettled into portion of the West for local cooling. Another weather system and associated cool shot will impact the central US Thursday thru Friday, then across the East Saturday, although still quite comfortable across most of the US with light national demand continuing. Overall, national demand will be low.

Daily Forecast

There is new evidence that the hedge funds are now short, having bet on weakness shortly after last Thursday’s government storage report.

Looking ahead to this week’s Energy Information Administration storage report, “The net result of the bearish weather shift is expected to be a ‘series of very large injections’ into supplies during the next two months, according to NatGasWeather. Estimates for Thursday’s EIA storage report point to a build in the 80s to 90s Bcf range, which is much larger than the five-year average injection of 21 Bcf and would improve deficits to near 425 Bcf from 485 Bcf. Further improvements that are likely to come would ease deficits toward 200 Bcf as May progresses, NatGasWeather said.