Natural Gas Price Fundamental Daily Forecast – Buyers Banking on Hotter Mid-Month Forecasts

Natural gas futures closed a little more than 1% higher on Friday on forecasts for hotter weather through mid-August than previously expected. The news means power companies should keep burning gas to cool-off homes and businesses rather than injecting the fuel into storage for the winter.

On Friday, September natural gas futures settled at $8.229, up $0.095 or +1.17%. The United States Natural Gas Fund ETF (UNG) finished at $28.62, up $0.28 or +0.99%.

For the week, the contract was down less than 1% after gaining about 45% during the prior three weeks. For the month, the contract was on track to gain about 52% after falling about 33% in June. That would be its second biggest monthly gain after soaring by a record 63% in September 2009.

High Coal Prices Make Nat Gas More Attractive

According to Reuters, gas-fired plants have provided over 40% of U.S. power this month, according to federal energy data, even though gas prices were up about 52% so far in July in part because coal prices keep hitting fresh record highs. That makes it uneconomic for some generators to use their coal-fired plants.

Refinitiv Supply/Demand Outlook

Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 96.2 bcfd so far in July from 95.3 bcfd in June. That compares with a monthly record high of 96.1 bcfd in December 2021.

Refinitiv projected average U.S. gas demand including exports would slide from 99.5 bcfd this week to 98.1 bcfd next week on less hot forecasts before rising back to 99.5 bcfd in two weeks when extreme heat returns.

Weather Pattern ‘Solidly Hot and Bullish’

Forecasters are anticipating strong demand in the week ahead after a weekend respite.

National Weather Service (NWS) data showed rainy conditions and milder temperatures in the 70s and 80s tracking through the Upper Midwest and New England over the weekend, easing national cooling demand modestly after a rash of severe heat waves earlier in July.

Even so, highs in the 90s were forecast for most of the South and West over the weekend, with 100s in parts of Texas, Nevada, Arizona and California.

Such conditions were expected to persist in those areas and expand to most of the Lower 48 in the week ahead, NatGasWeather said, calling the pattern “solidly hot and bullish.”

Short-Term Outlook

Sellers came in late in the week after an initial surge earlier in the week, as the market was approaching the psychological $10.00 level and as worries were surfacing about upcoming mid-month heat.

Technically, traders have two choices:  Buy strength and play for a breakout over $10.00, or wait for value on a pullback into the short-term support zone at $7.372 to $6.888, followed by $6.557 to $5.839.

The decision will be easier if the hot weather due to come in around mid-month is confirmed over the weekend.