Natural Gas Price Fundamental Daily Forecast – EIA Miss, Return of Hotter Temps Needed to Trigger Short-Covering Rally

Last year, the EIA recorded a 59 Bcf build, and the five-year average is an injection of 77 Bcf. We could see a continuation of the profit-taking and short-covering rally on Thursday if today’s storage injection comes in lighter-than-average. Looking ahead to today’s storage report, estimates show last week’s build likely came in well-below the five-year average. According to Reuters, a survey of traders and analysts on average showed respondents anticipating a 56 Bcf build for the week-ended July 6, with responses ranging from 47 Bcf to 67 Bcf.
James Hyerczyk
Natural Gas
Natural Gas

Natural gas futures are trading slightly lower after posting a dramatic technical reversal on Wednesday. There was no follow-through to the upside following yesterday’s strong rebound rally. This suggests the market is still bearish and that the upside reversal was likely fueled by aggressive profit-taking and position-squaring ahead of today’s U.S. Energy Information Administration’s (EIA) weekly storage report.

At 1039 GMT, September Natural Gas futures are trading $2.781, down $0.016 or -0.57%.

While today’s EIA report will have the biggest say in the direction of natural gas prices today, we did see a dip in production from recent highs, which may have also given short-sellers a valid reason to take profits after breaking from $2.992 to $2.751 in eight trading sessions.

Looking ahead to today’s storage report, estimates show last week’s build likely came in well-below the five-year average. According to Reuters, a survey of traders and analysts on average showed respondents anticipating a 56 Bcf build for the week-ended July 6, with responses ranging from 47 Bcf to 67 Bcf.Natural Gas Price Fundamental Daily Forecast – EIA Miss, Return of Hotter Temps Needed to Trigger Short-Covering Rally

Bloomberg calls for a median of 55 Bcf with a range of 34 Bcf to 67 Bcf. IAF Advisors are looking for a 50 Bcf build, while the ICE EIA Financial Weekly Index futures settled Tuesday at an injection of 49 Bcf.

Forecast

Last year, the EIA recorded a 59 Bcf build, and the five-year average is an injection of 77 Bcf. We could see a continuation of the profit-taking and short-covering rally on Thursday if today’s storage injection comes in lighter-than-average.

As far as the weather is concerned, NatGasWeather.com is saying, “What will be needed for patterns to again become solidly bullish is for the core of the hot upper ridge to shift back over the east-central, although the data has yet to show when this might occur but suggests during the last week of July, but more likely first week of August.”

“Until forecast maps show more impressive heat over the Great Lakes and Northeast, a sustained rally isn’t likely. That is, of course, unless Thursday’s EIA report shows a big bullish miss.”

The chart pattern indicates the trend is down. If the EIA report meets expectations and the weather forecast holds steady then we could see a resumption of the break to the May 7 bottom at $2.711.

If the EIA report misses big to the low side and the forecasts start to show heat returning earlier than expected then we could see a powerful short-covering rally with $2.872 a potential target.

Today’s price action will be primarily driven by the EIA report. Weather concerns are likely to return next week as we continue to get new updates.

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