Natural Gas Price Fundamental Daily Forecast – Build-up of Bearish Factors Weighing on Prices

Natural gas is inching higher early Wednesday in a mostly meaningless move. This follows yesterday’s plunge that was fueled by a weak outlook for the market due to last week’s bearish government storage report, rising production and favorable weather. Technical factors are also weighing on prices since the chart pattern indicates there is plenty of room to the downside until the market reaches identifiable support.

At 04:14 GMT, November natural gas futures are trading $2.287, up $0.004 or +0.18%.

The selling pressure is so strong that traders shrugged off the news that Lower 48 production on Tuesday was reported about 2 Bcf/d lower day/day, after surging above 92 Bcf/d during the weekend. Exports to Mexico were also higher.

Production “Much Too Strong”

“Cleary, production is much too strong, evidenced by above-normal national cooling degree days all summer long being able to only result in two smaller-than-normal builds,” NatGasWeather said. “As such, until the supply/demand balance shows considerable tightening, the background state will remain bearish.”

Short-Term Weather Outlook

According to NatGasWeather for October 1 to October 7, “Strong high pressure will dominate the southern and eastern US the next several days with very warm to hot highs of 80s to 90s. It will be hottest from Texas to the Mid-Atlantic Coast for strong late season demand. Chilly conditions continue across much of the West with lows dropping into the 20s to 40s for modest early season heating demand. Fresh cooling will spread across the northern US late in the week and again early next week with lows of 30s and 40s. Overall, stronger national demand this week vs last week due to a better mix of heating and cooling needs.

Daily Forecast

The near-term outlook is still bearish. The daily chart indicates there is plenty of room to the downside with the August 23 bottom at $2.185 the next likely downside target. On the upside, resistance comes in at $2.368.

We’re looking at further downside pressure today, but would not be surprised by a short-term short-covering rally since the market is down 11 sessions since its last major top. This move is not likely to change the trend, and it will probably be used by short-sellers to build an even larger position.

At this time, there is little to encourage aggressive counter-trend buying. The fundamental data does not suggest any meaningful sustained rally is likely over the near-term. Additionally, experts do not see any changes in weather patterns “that would significantly alter the expectation for temperatures to lean to the warmer/lower demand side of normal going forward,” according to Bespoke Weather Services.