Natural Gas Price Fundamental Daily Forecast – Bullish Traders Betting Supply Gap Won’t Be Filled

Natural gas prices rose on Thursday following the release of a weekly government report on supply. The report was right on target with the forecasts, but this was old news and traders were likely pricing in increasing demand due to rising temperatures.

On Thursday, July natural gas futures settled at $2.886, up $0.049 or +1.70%.

According to the U.S. Energy Information Administration, domestic supplies of natural gas rose by 106 billion cubic feet for the week-ended May 11. Analysts had forecast an increase of 105 billion cubic feet and on average over the last five years for the same week, inventories rose by 67 billion cubic feet.

Total stocks now stand at 1.538 trillion cubic feet, down 821 billion cubic feet from a year ago, and 501 billion below the five-year average, the government said.

Forecast

The main trend is up according to the technical swing chart. The trend turned up on a move through a pair of tops at $2.878. If the upside momentum continues, speculative buyers may make a run at the March 13 top at $2.919.

On the downside, support is $2.841 and $2.817. A trade through $2.804 will change the trend to down, but this won’t necessarily be bearish because of additional support levels at $2.800 and $2.771. It has to take out $2.714 convincingly to turn bearish.

The weather will be the main market driver at this time. Forecast models are pointing to above-average temperatures covering most of the country through the end of May.

Currently, natural gas stocks are 501 billion below the five-year average. This gap is unusually high so it is going to take a series of triple digit storage builds to fill it. Above-average temperatures are going to slow down this process.

Bullish traders are increasing bets that the summer cooling season will begin with a sizable storage deficit. This will make it difficult to fill the supply gap and prices should rise on this event. So essentially, it’s all up to the weather as to whether this rally continues.