Natural Gas Price Fundamental Daily Forecast – EIA Report Expected to Show Another Leaner-Than-Average Build

Short-sellers continue to dominate the natural gas market early Thursday, shortly before the regular session opening and the release of the government storage report at 1430 GMT.

Downside momentum has been building all week, following the break through the May 7 bottom at $2.711, putting the most active futures contract in a position to challenge its February 12 bottom at $2.674 and its January 5 bottom at $2.673.

At 0845 GMT, September Natural Gas is trading $2.684, down 0.005 or -0.19%.

The price action this week indicates that traders aren’t too concerned about the prospect of low stockpiles heading into winter, given this week’s forecast for a smaller-than-average build. Additionally, according to reports, weaker cash prices driven by cooler short-term forecasts are helping to drag the market lower this week.

The current sell-off suggests that traders aren’t too concerned about the hot weather and have been lulled into reacting to the record production. This even suggests that once the summer cooling season ends, high levels of production could quickly fill in the current supply gap.

On the flip side of this argument, another lingering, heat dome in late July or early August could turn prices around fairly quickly especially if it encourages short-sellers to aggressively cover positions.

Forecast

Looking ahead to today’s U.S. Energy Information Administration’s weekly storage report, traders are anticipating another lighter-than-average inventory build this week.

Bloomberg is forecasting a median 56 Bcf build for the week-ending July 13, with estimates ranging from 44 Bcf to 65 Bcf.

IAF Advisors is calling for a 56 Bcf build, while the ICE Financial Weekly Index futures contract settled Tuesday at an injection of 54 Bcf.

Last year, the EIA recorded a 31 Bcf injection, and the five-year average is a build of 62 Bcf. Last week, the EIA reported a 51 Bcf build for the week-ending July 6, well below the five-year average 77 Bcf injection.

At this point, it’s safe to say that the market will stop going down when it runs out of sellers.