Natural Gas Price Fundamental Daily Forecast – Heat Forecast Could Trigger Breakout Over $2.406

We’re going to be keeping an eye on the 11- to 15-day forecast and trader reaction to $2.406, over the next few days. If the forecasts call for increased heat then look for a breakout over this level with $2.518 the minimum upside target.
James Hyerczyk
Natural Gas

Natural gas futures are trading higher on Friday as investors shrugged off yesterday’s government report and shifted their focus back to the weather forecasts. There was no follow-through to the downside following Thursday’s sell-off which suggests the presence of buyers. Furthermore, yesterday’s selling pressure stopped at $2.320, slightly above last week’s low at $2.305. This suggests a secondary higher bottom may be forming.

The current chart pattern indicates a move through $2.406 could trigger an acceleration to the upside. It may only be short-covering at this time, but a strong rally could eventually extend into $2.518 to $2.568.

At 17:20 GMT, July Natural Gas is trading $2.384, up $0.059 or +2.54%.

Forecasts Point to Hotter Days Ahead

According to Bespoke Weather Services, “The most recent weather models showed a weak trough developing in the West in the 11- to 15-day period, while a downstream hotter ridge evolves farther East, which is similar to what occurred in the second half of May.”

“As in May, the best chance of above-normal heat in the coming weather pattern should be in the southern half of the United States and possibly into the Mid-Atlantic at times. Storminess is forecast to continue in the Midwest, limiting heat opportunities there.”

“We also saw a hotter shift in the European weeklies, hinting at hotter chances in the eastern half of the nation into the first half of July,” Bespoke chief meteorologist Brian Lovern. “We aren’t ready to go that far, but do think the slightly hotter-than-normal pattern can hang on into the very beginning of July, given the look of the day 15 pattern.”

U.S. Energy Information Administration Weekly Storage Report

On Thursday, the EIA reported a 102 Bcf injection into storage for the week-ending June 7. This was lower than the 110 Bcf forecast. Prices fell despite the potentially bullish news. The build was also bigger than last year’s build and the five-year average storage injection.

Daily Forecast

We’re going to be keeping an eye on the 11- to 15-day forecast and trader reaction to $2.406, over the next few days. If the forecasts call for increased heat then look for a breakout over this level with $2.518 the minimum upside target. If the forecasts call for temperatures to return to normal then look for a range bound trade. This won’t be bearish, per se, but it could allow speculators or professionals to build a support base before attempting to take the market higher next week.

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