Natural Gas Price Fundamental Daily Forecast – Downside Bias Building With Near-Term Targets at $2.691, $2.660 and $2.650

Natural gas futures are trading higher early Monday. There has been no follow-through to the downside despite a huge sell-off on Thursday and another lower close on Friday.

AT 0828 GMT, June Natural Gas futures are trading $2.718, up $0.007 or +0.26%.

The big concern for traders at this time is the storage deficit and how fast it will take producers to fill it. It is critical to close the gap before the summer cooling season begins. That’s what why we have the so-called injection season.

The problem is, the injection season stated over a month late and with this year’s erratic weather patterns, it’s hard to predict if summer will start later than usual to give producers a chance to rebuild gas in storage, or early to give the market a bullish tone.

Forecast

This week’s focus will be on the weather and Thursday’s U.S. Energy Information Administration’s storage report.

To be on the safe side, bearish investors would like to see triple digit injections in order to rebuild inventory as fast as possible. In order to achieve this, the weather has to be just about perfect in the major demand areas.

According to NatGasWeather.com for the May 7 to May 13 time period, “A weak cool front will exit the Northeast Monday, but still slightly cool with highs of 50s and 60s. The central and southern U.S. will be warm with 70s to lower 90s as high pressure dominates. The Southwest will be hot with highs of 90s and 100s, while the rest of the West will be mostly comfortable with 70s and 80s. Weak weather systems will track across the far northern U.S. mid-week, with a stronger one into the central U.S. next weekend, but overall a rather comfortable U.S. pattern with low demand.

Low demand usually means a storage build and that should keep a lid on any rallies while pressuring prices. However, the size of any sell-off will likely be determined by size of the expected build in this week’s EIA report. We should get an early estimate after Monday’s close.

The daily chart pattern has the market starting the week on the bearish side of several key retracement levels, but slightly above a series of main bottoms at $2.650, $2.660 and $2.691. I don’t see anything in the news that could prevent prices from weakening further today.