Natural Gas Price Fundamental Daily Forecast- Hurricane Worries Could Lead to Short-Covering

Natural gas futures closed lower on Thursday as investors reacted to forecasts for rising production and mild weather until the week-ending October 20. This should be enough to lower demand for heating and cooling.

The market lost ground even after a government report showed a smaller-than-expected storage build last week.

According to the U.S. Energy Information Administration (EIA), utilities added 42 billion cubic feet (bcf) of gas into storage in the week to September 29, leaving the total of fuel in inventories near the five-year average for this time of year at around 3.5 trillion cubic feet.

The EIA number was below analysts’ 51-bcf forecast build and compared with a year-earlier increase of 76 bcf and the five-year average of 91 bcf.

Forecast

Traders have to continue to monitor the price action and read the order flow at $2.880 today. If this price level fails then look for a test of the November 2016 bottom at $2.867. This is a potential trigger point for an acceleration to the downside. Despite the bearish outlook, investors should also be prepared for possible whip-saw action. This could be triggered by a news event.

The news could come from the U.S. National Hurricane Center.

On Thursday, the National Hurricane Center said a depression near Nicaragua strengthened into Tropical Storm Nate and was projected to strengthen into a Category 1 hurricane over the next few days as it moves toward the Gulf of Mexico and the coasts of Louisiana, Mississippi, Alabama and Florida.

The storm has caused some energy companies, including BP Plc and Royal Dutch Shell Plc, to pull non-essential workers from offshore production rigs in the eastern Gulf of Mexico.

Traders are worried that the storm could disrupt some output over the week-end.

The traditional fundamentals and the chart pattern are bearish but natural gas could turn into a news driven market rather quickly.