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James Hyerczyk
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Natural Gas

Natural gas futures are trading lower on Wednesday at the mid-session as traders continue to shed long positions ahead of Thursday’s government storage report that is expected to show a larger-than-average build. Additionally, the latest forecast from Bespoke Weather Services showed no net change in demand expectations based on the overnight guidance.

At 15:08 GMT, September natural gas futures are trading $2.110, down $0.061 or -2.81%.

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According to a consensus estimate, this week’s Energy Information Administration (EIA) weekly storage report is expected to show a 51 Bcf injection. Meanwhile, Energy Aspects is estimating a 60 Bcf injection in its preliminary report.

Last year, the EIA recorded a 51 Bcf injection for the similar week, and the five-year average is a build of 44 Bcf, according to government records.

Short-Term Weather Forecast

According to NatGasWeather for August 12 to August 18, “Very warm to hot conditions will continue across much of the U.S. today with highs of upper 80s to mid-90s, 100s in Southwest deserts into California.

Cooler expectations continue across the Midwest and Ohio Valley as weather systems bring showers and comfortable highs of 70s to lower 80s. The Northeast will be hot again today with upper 80s to lower 90s, then cooling into the 80s Thursday through Saturday to ease national demand.

Stronger weather systems will arrive across the Midwest and central/east-central U.S. early next week with highs of 70s to 80s to drop national demand to moderate.”

Daily September Natural Gas
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Short-Term Outlook

The weather pattern for the rest of the week is expected to be strong enough to drive up national demand. That could be enough to push cash prices higher, but many hedgers saw it coming so I don’t expect to see any price spikes to the upside.

Next week is expected to be hot in the West, but cool in the East so national demand should decline. However, heat is expected to return August 23-27.

Given the forecast and the above average EIA build, we’re looking for short-term selling pressure.

The market is trading on the weak side of a technical level at $2.149, which is now resistance, and on the strong side of a 50% level at $2.041.

We’ll maintain our slight upside bias as long as $2.041 holds as support. We may even extend it into the short-term 50% level at $1.973, which represents value. Overtaking $2.149 will indicate that buyers have returned.

We’ll give up our bullish bias if $1.973 fails and reassess the situation.

In order to truly generate a strong rally, we’re going to need a combination of heat, lower production and increased demand for LNG.

For a look at all of today’s economic events, check out our economic calendar.
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