Natural Gas Price Fundamental Daily Forecast – Gaps Lower on Weather Concerns

Natural gas futures gapped lower early Monday, continuing the downside momentum created by Friday’s sharp sell-off. Traders are concerned about the weather. Uncertainty is being created by differences in the European and U.S. weather models.

The current U.S. and European weather models are calling for warmer-than-normal temperatures the next two weeks, however, the forecasts differ on how hot it would be in early August. This uncertainty is pressuring prices because investors don’t like uncertainty especially in a highly volatile market like natural gas.

Weather Models

At this time, the European model is projecting U.S. gas consumption would rise from 78.2 bcfd this week to a summertime peak of 79.0 bcfd next week before easing to 78.7 bcfd in two weeks when it sees weather moderating.

The U.S. model, however, is projecting demand would rise from 78.7 bcfd next week to 79.1 bcfd in two weeks as it expects temperatures to continue to edge higher.

Until the U.S. and European weather models agree, we could see rangebound trade on both side of the retracement zone. A sustained move over $2.966 will be bullish. A sustained move under $2.934 will be bearish.

Other News

In other news, U.S. exports are expected to average 8.1 bcfd this week, up 40 percent from a year earlier so I don’t expect a complete washout.

Additionally, according to the U.S. Commodity Futures Trading Commission, U.S. natural gas speculators last week boosted their net long positions for a third week in the last four.

Looking ahead to Thursday’s EIA report, utilities likely added 34 billion cubic feet of gas into storage during the week-ending July 21. This will leave inventories about 4 percent above normal for this time of year.