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James Hyerczyk
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Natural Gas

Natural gas futures are edging lower shortly before the release of the government’s storage report at 14:30 GMT. Technical resistance is keeping a lid on prices, while the market is being underpinned by lower production, rising liquefied natural gas exports and expectations of increased cooling demand.

At 13:37 GMT, September natural gas is trading $3.229, down $0.030 or -0.92%.

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Prices Capped by Technical Factors

After surging to the upside earlier in the week, the rally stalled and prices retreated before consolidating the last two days. It “occurred even though near-term supply/demand fundamentals were largely unchanged – a clear indicator that technical factors and machine-driven algorithmic trading were moving the market,” EBW Analytics Group said.

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Bespoke Weather Forecast

Bespoke Weather Services observed little day/day change in its latest projections Wednesday, with heat remaining a dominant theme over large swaths of the country. That is expected to translate into elevated demand for natural gas to power air conditioners.

The pattern remains “hotter-biased” even with “some cooler weather into the Midwest and East at times, as western heat, plus hotter temperatures down in Texas, is enough to offset the cooling,” Bespoke said. “We remain on pace to come close to record hot levels for June as a whole” in terms of national gas-weighted degree days, “with the expectation that the hotter bias of the pattern rolls on into July.”

Lower Production Supportive

Production dipped lower to around 90 Bcf, Bespoke noted, down from recent highs above 92 Bcf. Liquefied natural gas (LNG) levels also ticked up and held near 10 Bcf, Natural Gas Intelligence (NGI) reported.

Energy Information Administration Weekly Storage Report

Analysts are looking for a lighter-than-usual storage injection with today’s EIA inventory report.

NGI is reporting that a Bloomberg survey showed a median estimate for a 70 Bcf injection for the week-ended June 11. Responses ranged from 65 Bcf up to 76 Bcf. A Reuters poll of analysts, whose estimates ranged from a build of 64 Bcf to 76 Bcf, landed at a median injection of 73 Bcf.

NGI’s model predicted a 74 Bcf injection for this week’s report. Last year EIA recorded an 86 Bcf build for the similar week, and the five-year average is an injection of 87 Bcf.

Daily Forecast

The main trend is up according to the daily swing chart, however, momentum is trending lower. A trade through $3.370 will signal a resumption of the uptrend with potential targets lined up at $3.377, $3.447 and $3.526. A trade through $3.025 will change the main trend to down.

The minor range is $3.025 to $3.370. Its 50% price at $3.198 is currently acting like support.

The short-term range is $2.922 to $3.370. Its retracement zone at $3.146 to $3.093 is the strongest support area. A test of this level could attract new buyers.

The fundamentals are bullish, but traders seem to have made the decision to buy dips rather than strength at this time. In other words, it’s more important for them to get a good price rather than chase the market higher at this time.

For a look at all of today’s economic events, check out our economic calendar.
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