Natural Gas Price Fundamental Daily Forecast – June Futures Expiration Could Lead to Heightened Volatility

Natural gas futures are up for a second session on Wednesday as aggressive counter-trend buyers continued to defend the two main bottoms at $1.822 and $1.802 and now a new higher main bottom has formed at $1.832.

Chart-watchers will not that the trend changes to up on a move through $2.027, but the move is likely to attract a new wave of selling pressure following a test of $2.093 to $2.157.

At 10:47 GMT, June natural gas futures are trading $1.965, up $0.020 or +1.03%.

The catalysts behind this week’s strength are expectations of increased demand as economies reopen amid the coronavirus pandemic and as weather models boosted heat in the coming weeks.

Natural Gas Intelligence (NGI) reported that spot gas prices climbed following the Memorial Day holiday weekend, with sharp gains on the East and West coasts driving up NGI’s Spot Gas National Average 17.5 cents to $1.685.

Despite the early strength this week, gains may be limited by technical factors with the expiration of the June futures contract causing heightened volatility. Meanwhile, the current weather patterns are potentially bullish, but this optimism is being offset by lower production, which remains more than 10 Bcf below winter highs.

Short-Term Weather Outlook

According to NatGasWeather for May 27 to June 3, “Hot high continues across California and the Southwest with record setting highs of 90s and 100s, locally 110s across Southwest deserts. However, this will be effectively countered by the rest of the US experiencing mostly comfortable highs of upper 60s to 80s. This includes Texas, the South, and Southeast where weather systems will stall this week with heavy showers and thunderstorms. A late season weather system will sweep across the Northeast late this weekend with showers and slightly cool highs of 60s and 70s.”

US Energy Information Administration Weekly Storage Report

The U.S. Energy Information Administration (EIA) reported that domestic supplies of natural gas rose by 81 billion cubic feet for the week-ended May 15. That figure matched the average increase forecasted by analysts polled by S&P Global Platts.

Total stocks now stand at 2.503 trillion cubic feet, up 779 billion cubic feet from a year ago, and 407 billion cubic feet above the five-year average, the government said.

Daily Forecast

This week’s developing rally may tell us if the traders are no longer following the “sell the rally at the front of the curve” strategy. A rangebound trade or a “stopper at $2.101 to $2.163 will tell us the strategy is still intact.

However, a sustained move over a $2.027 and an eventual takedown of $2.101 to $2.163 will indicate the selling is getting weaker and the buying stronger.

For a look at all of today’s economic events, check out our economic calendar.