Natural Gas Price Fundamental Daily Forecast – EIA Report Could Show Another Potentially Disappointing Build

Natural gas futures are inching lower as traders await the release of the latest government storage report at 14:30 GMT. The market is currently testing a key technical area. Trader reaction to this area should determine the near-term direction of the market.

Fundamentally, prices are being pressured by expectations of another potential bearish storage injection and a bearish change in the short-term weather forecasts. Spot gas prices around the country continued to surge, providing some support, despite a plunge in Southern California prices.

At 11:15 GMT, July natural gas futures are trading $3.057, up $0.018 or -0.59%.

Energy Information Administration Weekly Storage Report

This week, the EIA is expected to release another potentially disappointing weekly storage report. Estimates ahead of today’s report featured a wide range of guesses. Natural Gas Intelligence (NGI) said the consensus pointed to an injection that could fall below both last year’s 103 Bcf injection and the 96 Bcf five-year average.

NGI is also reporting that Reuters polled 17 analysts, whose estimates ranged from a build of 86 Bcf to 107 Bcf, with a median of 95 Bcf. A Bloomberg survey of 11 analysts had a tighter range of projections, but landed at a median of 94 Bcf. The average estimate of a Wall Street Journal poll also was 94 Bcf, while the NGI model showed a 95 Bcf injection.

Working gas in storage as of May 21 stood at 2,215 Bcf, which is 381 Bcf below the prior year and 63 Bcf below the five-year average, according to EIA.

Short-Term Weather Outlook

NatGasWeather said the 15-day outlook remained “plenty hot enough” for June 6-12. However, like the overnight European model, the latest Global Forecast System shed a few cooling degree days for the 10- to 15-day period by weakening strong upper high pressure enough to drop temperatures by several degrees over much of the country.

“The weather data needs close watching for this important June 13-17 period because any further cooler trends, and it could lead to disappointment,” NatGasWeather said.

Daily Outlook

Although the official start of the summer season is still weeks away, the mention of heat in the forecast for next week has created a slightly bullish buzz for natural gas futures. However, the price action the past two sessions, following Tuesday’s upside price spike suggests that the major buyers aren’t convinced yet.

Look for a bullish tone to possibly develop on a sustained move over $3.089, and for a bearish tone to possibly develop on a sustained move under $3.054.

Although a bearish tone could develop, we don’t expect to see a major change in trend. We also think any weakness will be a short-lived move.