Natural Gas Price Fundamental Daily Forecast – EIA Report Expected to Show 80 Bcf Build

With prices headed toward the psychological $2.50 level, the major concern for short-sellers is not the bearish fundamentals, but the technically oversold conditions. This creates the potential for a “sell the rumor, buy the fact” situation.
James Hyerczyk
Natural Gas

Natural gas futures are trading lower on Thursday, shortly before the release of this week’s government storage report. Improving weather conditions, rising production and the start of what could be a string of triple-digit injections are weighing on prices. The early weakness indicates that short-sellers may have enough momentum behind them to drive prices into the psychological $2.50 level.

At 11:30 GMT, June natural gas futures are trading $2.549, down $0.10 or -0.39%.

Short-Term Weather Outlook

According to NatGasWeather for April 18 to April 24, “Mild to warm conditions will continue across the East today with highs of 60s to 80s. The southern US will be very warm with highs of 70s to 90s, hottest across Southwest deserts. A weather system with showers and thunderstorms will track out of the central US and through the East Friday to Saturday, but only with minor cooling as highs reach the 50s and 60s. The western US will be mild to warm with 60s to 80s. Next week will be very comfortable across most of the US with upper 60s to 80s for very light demand besides the slightly hot southern US. Overall, national demand will be low.”

U.S. Energy Information Administration Weekly Storage Report

The guesses vary, but the consensus points toward a build in the upper 80 Bcf range. Bloomberg is expecting a build of about 52 Bcf to 96 Bcf, with a median of 86 Bcf. Natural Gas Intelligence is predicting an 87 Bcf build. Reuters is looking for an injection of 82 Bcf.

Last year, the EIA reported a 34 Bcf withdrawal, and the five-year average injection is 21 Bcf. Inventories as of April 5 stood at 1,155 Bcf, which is 183 Bcf below year-ago levels and 485 Bcf below the five-year average, according to the EIA.

Daily Forecast

With prices headed toward the psychological $2.50 level, the major concern for short-sellers is not the bearish fundamentals, but the technically oversold conditions. This creates the potential for a “sell the rumor, buy the fact” situation. Watch for a potential reversal to the upside today even if the data is bearish, but especially if the data comes in lower than expected.

The current mild shoulder season has pushed bullish traders to the sidelines as they await the summer cooling season. This being said, if $2.50 is taken out with conviction then $2.00 becomes the next target. Prices are going to start becoming attractive at $2.50 or lower. This may bring in enough speculative buyers to reverse today’s early weakness.

 

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