Natural Gas Price Fundamental Daily Forecast – Light Short-Covering Due to Possible Heat After June 18

Natural gas prices are edging higher for a third straight session as traders begin to price in the return of hotter temperatures after June 18. So far, all we’ve seen is some light short-covering. However, if speculative buyers begin to enter the picture then we could see a move into $2.518 to $2.568 over the near-term. Gains are likely to be limited to this area due to large storage builds. Furthermore, without the construction of a support base, it is going to be hard to develop into a longer-term more.

At 12:43 GMT, July natural gas is trading $2.364, up 0.007 or +0.30%.

Short-Term Weather Outlook

According to NatGasWeather for June 11 to June 17, “A large weather system and associated cool front will sweep across the northern and central US over the next several days with highs of 60s to 70s. This system will also cool Texas, the South, and Southeast into the comfortable 80s, although warming back into the upper 80s to lower 90s late week. Strong high pressure will bring heat across the West and Southwest with highs of upper 80s to 100s for regionally strong demand. Overall, demand will be low.

U.S. Energy Information Administration Weekly Storage Report

Last week, the EIA reported another huge 119 Bcf build into inventories for the week-ending May 31. The reporting period included the Memorial Day holiday, which analysts blamed as the primary reason for the large miss.

The number was well above last year’s 93 Bcf injection and the five-year 102 Bcf average build.

Daily Forecast

The price forecast hasn’t changed from Monday. We’re getting the short-covering and the price stabilization we were expecting. This is okay for short-term strength, but for longer-term moves, we’d like to see “real” buying. This could come later in the season, but first, the strong short sellers have to be driven out of their positions.

The short-term forecast predicts low demand, but hotter temperatures are forecast for later in the month so this week’s price action may start to reflect these concerns. Therefore, the selling pressure may not be as intense as we’ve seen the past two weeks. Remember that professional traders tend to look at forecasts 10 to 21 days into the future.

Watch the language used in the weather reports. Don’t expect a prolonged rally until forecasters start using terms like “heat dome”.