Natural Gas Price Fundamental Daily Forecast – EIA Report Expected to Show 57 Bcf Injection

Despite the rally on Wednesday, the hotter trends in the overnight data is still not hot enough to impress and suggests there is still a bearish bias in the market. The rally we say yesterday was probably driven by short-covering due to the slight change in the weather pattern and grossly oversold technical indicators.
James Hyerczyk
Natural Gas

Natural gas futures are inching higher early Thursday after posting a strong short-covering rally on Wednesday ahead of today’s weekly government storage report. Yesterday’s rally was fueled by new forecasts calling for hotter temperatures with some models showing lower chances of the cooling that had been expected. Signs of increasing demand that should tighten the balance outlook also underpinned prices.

At 07:12 GMT, September natural gas futures are trading $2.241, up 0.008 or +0.36%.

Prices shot higher shortly after the opening on Wednesday after Bespoke Weather Services said its models are “no longer showing nearly as much cooling” moving into the eastern half of the Lower 48 late next week. The forecaster also said the change in the forecast should lead to a “notable jump” in forecast gas-weighted degree days (GWDD) based on the latest weather data.

Bespoke went on to day, “We still believe anomalous heat can continue as we move near and just beyond mid-August, with rather persistent blocking signal favoring hotter risks across the southern half of the nation, likely giving regions such as Texas their hottest weather of the summer in the current medium-range time frame,” including highs climbing to near or just above triple digits on the hottest days.”

Bespoke also noted balances strengthened in the latest data.

The forecaster said, power burns are “seeing more high-side revisions in today’s data, climbing to their highest absolute level yet yesterday, despite lower GWDDs versus the heat we saw a couple of weeks ago.” Bespoke further added, “We expect strength to continue the rest of this week given a lower wind pattern in place…the totality of the data still leads us to believe there is little reason to move lower, pending cash prices” and this week’s storage data.

NatGasWeather said on Wednesday, “Most of the overnight data was slightly hotter trending to add a couple CDDs, although still not nearly hot enough through August 11-12. There’s still potential for a little hotter pattern arriving over the eastern US August 12-15, but overall, even with the slight hotter overnight trends, the coming pattern still isn’t impressive due to numerous weather systems with showers and cooling expected to sweep across the Midwest and east-central US, including at times deep into the Southeast.

So, even though recent data again suggested a hotter pattern has potential to arrive over the Midwest and East August 12-13th, the data isn’t convincing and needs more evidence if the markets are to fully expect it. With that said, the pattern is likely to be viewed as a little hotter trending beginning August 12-13 and could be reason if prices added a couple cents.”

U.S. Energy Information Administration Weekly Storage Report

Thursday’s weekly storage report is expected to show a 57 Bcf injection for the week-ending July 26. Energy Aspects is calling for a 55 Bcf injection. Intercontinental Exchange EIA Financial Weekly Index futures settled Tuesday at 60 Bcf.

Last year the EIA recorded a 31 Bcf injection for the period, and the five-year average build is 37 Bcf.

Daily Forecast

Despite the rally on Wednesday, the hotter trends in the overnight data is still not hot enough to impress and suggests there is still a bearish bias in the market. The rally we say yesterday was probably driven by short-covering due to the slight change in the weather pattern and grossly oversold technical indicators.

The short-term range is $2.305 to $2.201. The market is currently trading on the strong side of its 50% to 61.8% retracement zone at $2.227 to $2.203. This zone has to hold as support or prices will continue lower.

The intermediate range is $2.476 to $2.101. Its retracement zone at $2.288 to $2.332 is the next upside target. Sellers could come in on a test of this area especially against the main top at $2.305.

I could get excited about the upside if buyers can take out $2.332.

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