Natural Gas Price Fundamental Daily Forecast – Could Test $2.831 to $2.869 if Heat Returns

Natural gas futures are trading nearly flat shortly before the regular session opening. Traders continue to digest the latest weather news while pricing in the early estimates of this week’s U.S. storage data. Furthermore, we could start to see a slow down in the buying as the market approaches a key technical retracement zone. A test of this area could bring in the hedgers, which would stop the rally.

At 0941 GMT, September Natural Gas futures are trading $2.797, unchanged.

Traders started the week looking at weather forecasts that were leaning toward slightly cooler. However, at midday, the forecast shifted to hotter temperatures. This helped underpin prices into the close.

At midday, NatGasWeather said that it saw the return of heat “especially for next week, seeing a stronger ridge over the eastern half of the country.”

They went on to say that, “The data had been a little cooler trending around August 9, seeing a weather system into the Midwest and Northeast, although the more recent data isn’t as convincing as we see ways the hot ridge blocks any weather systems that try to dip down out of Canada.”

“…Overall, we see the pattern trending from neutral to slightly bullish, and mainly due to further hotter trends over the eastern half of the country late this weekend into the following week,” the firm said. “Going forward, we expect the markets will be more sensitive to hotter trends over cooler trends, especially after two straight bullish misses from the Energy Information Administration’s (EIA) weekly storage report and due to deficits remaining hefty.”

Forecast

Looking ahead to Thursday’s EIA report, the early estimate shows a 40 Bcf to 45 Bcf build for the week-ending July 27. Last year, the EIA recorded an 18 Bcf injection, and the five-year average is a build of 43 Bcf.

Technically, it’s all going to come down to how traders respond to the 50% to 61.8% retracement zone at $2.831 to $2.869.

Fundamentally, the bullish traders are going to try to drive the market higher on the back of the weather reports that are calling for heat to return the second week of August.

Bearish traders are counting on an increase in production to keep a lid on prices and perhaps drive them lower if the weather pattern changes and cooler temperatures return.