Natural Gas Price Fundamental Daily Forecast – Heightened Volatility Expected Ahead of July Futures Expiration

Natural gas futures are edging lower on Monday, hovering near an 11-week low as a drop in liquefied natural gas (LNG) exports due to the extended shutdown of the Freeport LNG export plant in Texas continues to offset worries about hotter weather and higher demand.

At 14:30 GMT, August natural gas futures are trading $6.112, down $0.169 or -2.69%. The United States Natural Gas Fund ETF (UNG) opened at $20.79, down $0.50 or -2.35%.

Short-Term Weather Forecast

According to NatGasWeather for June 27 – July 3, “Nice to warm conditions will rule most of the interior US Monday –Wednesday as weather systems bring showers and comfortable highs of 60-80s. Hotter exceptions will be across the West Coast, South Texas, and portions of the Southeast with highs of 90s to 100s due to upper high pressure.

National demand will increase late in the week as the interior US warms into the 80s and 90s, although cooling across the Northwest and Upper Midwest.

Overall, moderate-high demand through Wednesday, then high thru Sunday.

Daily Forecast

The Freeport LNG issue is going to be a problem until at least September, but most likely until December. So traders are going to be baking in the news of the shutdown for months to come.

In the meantime, the focus will be on the bearish-trending fundamentals:  higher production, weaker LNG export volumes and seasonal temperatures.

Analysts at EBW Analytics Group see “moderate bearish weather shifts” for the first week of July, weaker LNG feed gas volumes and rising production.

Additionally, “Dry gas production readings are up more than 1.0 Bcf/d since late last week and may continue to climb through Thursday,” EBW senior analyst Eli Rubin said. “There is even an outside chance the supply could challenge year-to-date highs this week before likely turning lower in early July.”

Bespoke Weather Services is also leaning toward the bearish side, observing higher production and falling LNG volumes in the latest estimates over the weekend.

Technically speaking, August natural gas may have to test $5.865 before new money comes into the market.

Furthermore, we could see heightened volatility or even a short-term reversal of the downtrend with the upcoming July futures contract expiration.