Natural Gas Price Fundamental Daily Forecast – Bullish EIA Report Could Launch Breakout Over $6.812

Natural gas futures are edging higher early Thursday, putting the market on the brink of a technical breakout to the upside, ahead of today’s U.S. government weekly storage report. The catalyst behind the market’s strength are forecasts calling for a much smaller-than-expected storage build last week as power generators burned lots of gas to keep air conditioners humming during an extreme heat wave.

Bullish weather forecasts are also driving prices higher with a heat wave still blistering much of the country. In Texas, for example, power demand is breaking all-time highs at a time when gas output is dropping.

At 10:38 GMT, September natural gas futures are trading $6.618, up $0.029 or +0.44%. On Wednesday, the United States Natural Gas Fund ETF (UNG) settled at $22.41, up $1.20 or +5.66%.

Refinitiv Gas Output, Gas Demand Projections

Data provider Refinitiv said average gas output in the U.S. Lower 48 states has risen to 95.9 bcfd so far in July from 95.1 bcfd in June and not far below the monthly record of 96.1 bcfd in December 2021, Reuters reported.

Over the past two days, however, output was on track to drop 2.4 bcfd to a preliminary three-week low of 94.2 bcfd on Thursday.

With hotter weather coming, Refinitiv projected average U.S. gas demand including exports would rise from 96.2 bcfd this week to 99.0 bcfd next week, Reuters reported.

Short-Term Weather Outlook

According to NatGasWeather for July 14 to July 20, “Much of the western, central and southern U.S. will not be hot into the weekend with highs of upper 80s to 110s, hottest California to Texas.

A weak tropical system remains stalled along the U.S. Gulf Coast with heavy showers and local cooling.

A weather system with showers and comfortable highs of 70s and 80s will track across the Great Lakes, Ohio Valley, and Northeast the next few days to ease national demand slightly. However, hot high pressure will expand to rule most of the U.S. next week with highs of upper 80s to 100s for strong to very strong demand.”

US Energy Information Administration Weekly Storage Report

According to a consensus of estimates, today’s EIA weekly storage report, due to be released at 14:30 GMT, is expected to show utilities added about 56 billion cubic feet (bcf) of gas into storage during the week ended July 8. The estimate compares with an injection of 49 Bcf during the same week last year and a 5-year average injection of 55 Bcf.

Natural Gas Intelligence (NGI) wrote a Bloomberg poll showed a median injection projection of 58 Bcf, with a low estimate of 53 Bcf and a high of 72 Bcf. A Reuters survey produced injection estimates that spanned 48 Bcf to 69 Bcf. It landed at a median of 57 Bcf.

A Wall Street Journal poll found an average injection expectation of 61 Bcf, and it also generated a range of 48 Bcf to 69 Bcf.

Daily Forecast

Technically speaking, a bullish EIA report could launch a strong rally over a long-term 50% level at $6.557. The first target will be a top at $6.812.

Taking out $6.812 will change the main trend to up. If this creates enough upside momentum, we could see a near-term surge into a retracement zone at $7.461 to $7.965. Look for sellers to return on a test of this area.

A bearish report will likely trigger a break back into a minor support area at $6.068 to $5.839. Aggressive counter-trend buyers could come in on a test of this area. If $5.839 fails as support, however, then look for the selling pressure to possibly extend into the recent main bottom at $5.324.