Natural Gas Price Fundamental Daily Forecast – Despite Bullish Fundamentals, the Market is Lower for the Week

Natural gas futures are trading lower early Friday amid profit-taking and position-squaring ahead of the weekend. According to NatGasWeather, the heat is expected to taper some in the coming days, which may be one of the reasons for the early weakness.

“National demand will be much lighter this weekend and next week as a series of weather systems over Canada advance aggressively across the eastern half of the U.S. with comfortable highs of 70s to mid-80s,” the firm noted.

At 06:57 GMT, September natural gas futures are trading $3.970, down $0.089 or -2.19%.

On Thursday, the futures contract jumped 2.32%, helped by strong fundamentals and a bullish government storage report. The storage surprise reminded investors that there is a supply/demand imbalance that could create problems this winter.

Weekly US Energy Information Administration Storage Report

The U.S. Energy Information Administration (EIA) reported Thursday that domestic supplies of natural gas rose by 36 billion cubic feet for the week-ended July 23. Ahead of the report, NGI wrote that this week’s EIA storage report was expected to show an injection into storage in the low 40s Bcf.

NGI also reported a Reuters poll found projections ranging from a build of 33 Bcf to 52 Bcf, with a median injection of 42 Bcf. Results of a Bloomberg survey showed estimates spanning 34 Bcf to 49 Bcf, with a median of 41 Bcf and a Wall Street Journal survey produced estimates from 39 Bcf to 47 Bcf with an average of 43 Bcf. The NGI model predicted a 49 Bcf injection.

Total stocks now stand at 2.714 Tcf, down 523 Bcf from a year ago and 168 Bcf below the five-year average, the government said.

Daily Forecast

Today’s early weakness has turned the market lower for the week. Given the bullish fundamentals including tight supply, low production and solid liquefied natural gas (LNG) demand, this move suggests that traders think the market is overpriced and may be due for a short-term pullback.

Technically, the main trend is up, but momentum has been trending lower since Monday. A trade through $4.165 will signal a resumption of the uptrend. The main trend will change to down on a move through $3.154. This is highly unlikely however.

The minor trend is down. This is controlling the momentum. A trade through $3.837 will indicate the selling pressure is getting stronger.

The nearest support zone is $3.869 to $3.799. This zone stopped the selling on Wednesday at $3.837.

On the upside, the resistance comes in at $4.001 to $4.040. Trader reaction to this zone could determine the direction of the market on Friday. Look for a strong tone to develop on a sustained move over $4.040, and this week’s weak tone to continue on a sustained move under $4.001.

Buyers could return if the price is right, especially with NatGasWeather predicting heat intensifying August 6-11 with most of the Lower 48 warming back above normal with highs of mid-80s to 100s for a return to strong national demand.

“The big picture still looks bullish” for futures “and could be aided by any hotter weather shift,” Bespoke Weather Services said. “We say it over and over again, but until production can get to 2021 highs, it is difficult to see enough loosening in supply/demand balances to make the market more comfortable with the storage situation.”