Natural Gas Price Fundamental Daily Forecast – Less Cooling Demand Expected Next Week

Natural gas futures are trading lower early Friday on low volume. There has been no follow-through to the downside after yesterday’s steep sell-off. This suggests the selling may have been overdone, or investors are waiting for more information.

At 0730 GMT, September Natural Gas futures are trading $3.017, down $0.16 or -0.49%.

Prices rose slightly following the release of the weekly government storage report on Thursday before sellers slammed the futures contract into the close.

According to the U.S. Energy Administration (EIA), utilities added 28 billion cubic feet (bcf) of gas into storage during the week-ending July 14. This left inventories about 5 percent above normal for this time of year. It was also the smallest injection for the week since 2012.

The EIA report was actually good news because investors were looking for a 32 bcf decline. Prices rallied according. The five-year average build for this time period was 59 bcf.

Forecast

After the initial rally in response to the larger-than-expected draw, natural gas prices fell sharply lower in reaction to new weather forecasts calling for less cooling demand next week and a slow but steady rise in production.

On Thursday, the September futures contract stopped at $3.101, slightly below the previous top at $3.114 and the major 50% level at $3.134.

The new short-term range is $2.830 to $3.101. If the selling continues today then we could see a test of $2.966 to $2.934. This area may be attractive to new buyers. If the selling is strong enough to take out this area then we could see another test of $2.830. It all depends on whether investors feel there is a chance of another heat related rally.

Meteorologists forecast temperatures in August would be near normal after a warmer-than-normal June and July. This would be bearish for natural gas because it would likely mean storage would come in at about 1.7 trillion cubic feet during the April-October injection season.

In conclusion, the market is likely to be under pressure as long as it remains under $3.114 to $3.134. However, the market could find support at $2.966 to $2.934. If this occurs, the market could become rangebound.