Natural Gas Price Fundamental Daily Forecast – EIA Report Expected to Hit Triple-Digits for 7th Consecutive Week

Short-covering and position-squaring ahead of today’s government storage report is helping to hold natural gas prices steady-to-slightly better on Thursday. Yesterday, natural gas futures hit another multi-year low as traders couldn’t agree on the strength and duration of the current hot weather pattern expected to arrive the end of June/early July.

At 09:20 GMT, August natural gas futures are trading $2.269, up $0.006 or +0.27%.

Falling spot prices continued to weigh on the nearby futures contract, while oversold technical conditions failed to attract fresh buyers.

Weather is the Key

Traders were being guided by an 11-15 day forecast from Bespoke Weather Services. For late June, they see a slightly warmer West, but less heat in the South. For early July, the American model is showing less-cooler temperatures in the East. However, the European model sees slighter hotter temperatures in the West and a little cooler in the East.

“While we still do not see extreme heat on the way, our view is a continued lean near to slightly above-normal gas-weighted degree days late June into early July, with a better chance of a cooler pullback in the eastern U.S. coming after the first week or so in July as the heat ridge migrates back out into the western U.S.,” Bespoke chief meteorologist Brian Lovern said. “Weakening Madden-Julian Oscillation does throw a little more uncertainty into the timing of these pattern cycles, however.”

NatGasWeather said, “To our view, the Global Forecast System (GFS) model looks hot enough to satisfy, but the European model would need to trend hotter to better match it if the markets are to expect it, and that’s where the bullish case has failed.”

U.S. Energy Information Administration Weekly Storage Report Estimates

Traders expect today’s EIA report, due out at 14:30 GMT, to show a seventh consecutive triple-digit injection if it matches the forecasts.

Bloomberg is looking for an injection range between 96 Bcf and 113 Bcf, and a median of 105 Bcf. Reuters is looking for a range of 96 Bcf to 115 Bcf, with a median of 105 Bcf. Natural Gas Intelligence is looking for a build of 105 Bcf.

Last year, the EIA report showed a 95 Bcf injection, while the five-year average injections stands at 84 Bcf.

Daily Forecast

The trend is down and the tone bearish because the American and European weather models can’t agree on the length or duration of the heat that is expected to arrive late June/early July. Furthermore, the country seems to be divided with heat in the West, and cooler to not so hot temperatures in the East.

Additionally, traders are afraid of a big surprise in the EIA report so they are unwilling to take sizable bullish positions ahead of the report.

On the bright side, liquefied natural gas (LNG) exports are rising, hitting a new high around 6 Bcf on Wednesday, according to Bespoke. In addition, power burns remain healthy, though not as tight as the last couple of weeks, according to Natural Gas Intelligence. The service also says that LNG exports are seen by analysts as key to reviving gas prices, which remain near multi-year lows.

The factors that could save the market this week from further selling is if buyers treat a bearish EIA report as a “sell the rumor, buy the fact” situation, or if technical buyers produce a closing price reversal bottom.