Natural Gas Price Fundamental Daily Forecast – Heat Coming but Trader Reaction to $3.981 Sets the Tone

Natural gas futures are trading flat early Tuesday after running into a technical resistance level earlier in the session. On Monday, the market posted a solid gain, flipping Friday’s weak performance, but today’s follow-through attempt fizzled after testing a short-term 50% level at $3.981.

The price action reflects conflicting fundamentals with bullish traders supporting the market on the back of hotter shifts in the latest weather models, and bearish traders leaning on stepped up production.

At 10:52 GMT, October natural gas is trading $3.964, up 0.004 or +0.10%.

Short-Term Weather Outlook

According to NatGasWeather for August 24-30, “Strong upper high pressure will rule the central, southern, and eastern U.S. with warm/very warm to hot highs of upper 80s to 100s, hottest over Texas and the Southwest with mid-90s-100s.

The Northwest and Upper Midwest will be comfortable with highs of 70s to 80s as weather systems bring scattered showers. Hot upper high pressure will weaken early next week with comfortable highs of 70s and 80s over the northern and eastern U.S., but still very warm to hot over the southern and eastern U.S. with highs of mid-80s to 90s, locally 100s in the Southwest deserts.

Overall, national demand will be high through the weekend, then easing.”

Bespoke Sees One More Round of Heat

Natural Gas Intelligence (NGI) wrote, even though the summer season is winding down, the latest forecasts show at least one more round of truly hot weather across much of the United States.

Bespoke said there was another notable bump in projected gas-weighted degree days (GWDD) for the 15-day period. With the revision, the week-ending August 27 is now projected as a “record hot week, GWDD wise, for the time of the year.”

Early Look at This Week’s EIA Storage Report

NGI is reporting the upcoming Energy Information Administration (EIA) storage report could show some significant retightening versus last week’s report. NGI is modeling a 37 Bcf injection for the upcoming EIA report, which covers the week ended August 20. Bespoke called for a 29 Bcf build.

Last year, the EIA recorded a 36 Bcf build for the similar week, while the five-year average is a 53 Bcf injection.

“The retightening in the data may just be enough to make a run back toward $4.00 into September expiration” later this week, Bespoke said.

Daily Forecast

The short-term range is $4.211 to $3.751. This makes its retracement zone at $3.981 to $4.035 the area to watch on Tuesday.

With the fundamentals mixed, it’s going to be hard for buyers to overcome the 50% level at $3.981.

If traders focus on the upcoming heat then look for a rally through $3.981. If the forecasts call for the heat to last longer than currently expected then look for an attempted breakout over $4.035.

If rising production continues to offset the weather news then look for a sustained move under $3.981. If this generates enough downside momentum then look for the selling to possibly extend into a minor pivot at $3.859.