Natural Gas Price Fundamental Daily Forecast – Cooler Temps, Steady Production Should Weaken Prices

Natural gas futures are bouncing back early Friday following Thursday’s steep sell-off that was fueled by a slightly higher-than-expected build in the Energy Information Administration’s weekly storage report.

At 0917 GMT, October Natural Gas futures are trading $2.925, up $0.012 or +0.41%.

On Thursday, the EIA reported a storage build of 33 Bcf, raising total stocks to 2387 Bcf for the week-ending August 10. Total stocks are 687 Bcf less than inventories one year ago and 595 Bcf less than the five-year historical average.

The higher-than-expected storage injection broke the four week streak of EIA report misses. The build was caused by a low power burn and higher production.

In other news, U.S. dry gas production fell 700 MMcf/d on the day to 80.8 Bcf/d, but dry gas production continued to stay strong, as it has stayed above 80 Bcf/d for 14 straight days, according to S&P Global Platts Analytics.

According to the National Weather Service, the most recent six- to 10-day temperature forecast calls for cooler-than-average temperatures for much of Texas, the Midcontinent and the Upper Midwest.

Power burn totals are 38.6 Bcf/d but are expected to fall to 34.96 Bcf/d by August 19.

Forecast

Simply stated, if the power burn continues to drop and production holds steady or rises then prices are likely to fall over the near-term.

The daily trend changed to down on the daily chart on Thursday when sellers took out $2.905. However, the lack of follow-through suggests that stubborn longs are still betting on further upside action.

If the next counter-trend rally fails to take out $2.979 with conviction then look for sellers to re-emerge. If the selling is strong enough then yesterday’s low at $2.898 should be taken out easily. This could trigger a steep break into at least $2.865 to $2.838.