Natural Gas Price Fundamental Daily Forecast – Just Enough Heat in Forecast to Fuel Short-covering Rally

Natural gas futures started the week on solid ground as investors reacted to reports of the return of more summer-like weather. The move didn’t come as too much of a surprise because last week’s price action suggested the presence of buyers.

Firstly, the market stopped going down at $2.832 when sellers had the chance to take out the November 9 bottom at $2.815 and secondly, prices went up after the U.S. Energy Information Administration’s weekly storage report showed a bigger-than-expected build. Both of these moves served as an indication that sellers were reluctant to short in this price area and at this time of the year when temperatures can turn hot rather quickly.

August natural gas futures settled at $2.929, up 0.065 or +2.27%.

Forecast

We could have a weather market developing because forecasters have inserted the key phrase that is usually synonymous with higher prices:  Hot high pressure.

According to natgasweather.com for July 10 – 16, “Hot high pressure with highs of 90s and 100s will expand to cover most of the country this week for strong demand besides portions of the Great Lakes and northeastern U.S.”

“Next weekend, a weak weather system will bring showers and minor cooling across the Great Lakes and East while remaining hot over the rest of the country.”

“Overall, natural gas demand will be high to very high besides the northeastern U.S.

Looking ahead to Thursday’s EIA weekly storage report, traders are expecting to show a build in a range between 51 and 61 billion cubic feet in the week-ended July 7. This compares with 72 bcf in the preceding week, an increase of 64 bcf a year earlier and a five-year average rise of 72 bcf.

If the short-covering rally continues on Tuesday then we could see a surge into $2.977 to $3.011. We’re going to need a wave of speculative buying to take out this zone. This will only occur, in my opinion, if the new weather forecast calls for a “lingering hot high pressure dome”.