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James Hyerczyk

Natural gas futures are trading nearly flat shortly after the release of the U.S. Energy Information Administration weekly storage report. However, the price action is still being controlled by the two retracement zones at $2.159 to $2.132 and $2.191 to $2.226. Essentially, until buyers can sustain a move over $2.226 to generate an upside bias or sellers can sustain a move under $2.132 to create a downside bias, the market is likely to remain rangebound.

At 14:51 GMT, October natural gas is trading $2.180, up $0.003 or +0.14%.

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U.S. Energy Information Administration Weekly Storage Report

The EIA reported on Thursday at 14:30 GMT that domestic supplies of natural gas rose by 59 billion cubic feet for the week-ended August 16. Analysts were looking for an increase of 61 billion cubic feet. Total stocks now stand at 2.797 trillion cubic feet, up 369 billion cubic feet from a year ago, but 103 billion below the five-year average, the government said.


Short-Term Weather Outlook

According to NatGasWeather for August 22 to August 28, “Strong high pressure will dominate the western and southern US with highs of 90s to 100s, hottest from California to Texas for strong demand. High pressure will continue across the East today with highs again warming into the upper 80s to near 90 Fahrenheit as far north as New York City, then cooling Friday through the weekend as a weather system brings showers with highs of only 70s to lower 80s. A brief warm up is expected over the southern and eastern US early next week for a bump in national demand, followed by additional weather systems with cooling. Overall, national demand will be high today then easing to moderate through next week.

Daily Forecast

The price action suggests October natural gas may have found its sweet spot on the charts between $2.132 and $2.226. These are the trigger points for breakouts, provided enough volume arrives to sustain the move.

The latest storage report offered nothing major to chew on for the bulls or the bears so once again we’re going to have to rely on the price action and the weather to determine the next move.

EBW Analytics Group says, “With much cooler weather expected this weekend and a bearish forecast for the first two weeks in September, the September contract is poised for further losses, potentially testing support at $2.15…or even lower prices next week. The potential for natural gas to hold ground depends heavily on this morning’s weekly storage report.”

Since the report came in pretty close to neutral then focus on trader reaction to $2.191 and $2.159 for an early jump on the next move, and $2.226 and $2.132 for perhaps an even stronger breakout.

The direction depends on whether the short sellers want to give in a little to trigger a short-covering rally so they can short again at better prices. Or, if the short sellers smell blood and want to punish the last of the longs while squeezing every drop of profit out of the market.

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