Natural Gas Price Fundamental Daily Forecast – Due for Short-covering Rally, but Sellers Still in Control

Natural gas futures rebounded on Tuesday after early session weakness, producing a potentially bullish closing price reversal bottom in the process. This is a technical chart pattern which suggests the buying may be stronger than the selling at current price levels.

September natural gas futures settled at $2.819, up $0.025 or +0.89%.

Other technical indicators show the market may be oversold. This means that it has run out of sellers. This makes sense because the downside is limited at current price levels. This also means the market is ripe for a short-covering rally. This does not mean the trend is changing to up.

A trade through $2.990 will change the trend to up. However, unless the weather turns bullish, sellers are likely to come in to defend the downtrend.

Forecast

If the potentially bullish chart pattern gains traction the investors are going to try to fill in the gap on the daily chart at $2.90 to $2.923. This area will be the first obstacle to overcome for any aggressive, counter-trend buyers.

Fundamentally, the weather and the current supply are exerting pressure on the market.

According to natgasweather.com, for the July 31 to August 6 period, “A weekend weather system with cooling lingers over the East with showers and thunderstorms, resulting in comfortable temperatures to open the week. This system will be steered over the southern U.S. during the middle of the week while fizzling.”

“It will be very hot over the West with California to the Pacific NW seeing highs of mid-90s to 100s.”

“A fresh weather system will arrive over the central, southern, and eastern U.S. late week through the weekend for light demand.”

“Overall, natural gas demand well be Moderate.”

Thursday’s U.S. Energy Information Administration’s storage report is expected to show a build of about 22 billion cubic feet in the week-ended July 28.

That compares with a gain of 17 billion cubic feet in the preceding week, a withdrawal of 6 billion a year earlier and a five-year average rise of 44 billion cubic feet.

The fundamentals are bearish, and we could see a short-covering rally, but the market is in the hands of some strong sellers, and they are not likely to let up until there is a major change in the weather and the supply.