Natural Gas Price Fundamental Daily Forecast – Market Drifting Lower on Uncertainty

Natural gas futures closed lower on Wednesday as investors continued to digest the impact of Hurricane Harvey on the industry. At this time, the primary concern for traders is production. This is a potentially bullish situation because it deals with the supply side of the equation. The issue with crude oil, for example, is with demand.

October Natural Gas futures settled at $2.939, down $0.044 or -1.48%.

Forecast

With the refineries shutdown in Texas and no timetable set for their return, it’s hard to predict the direction for natural gas. All we can do is watch the charts. News is scarce and it seems like nobody is talking. Traders seem to be adopting a “when in doubt, stay out” mentality.

Currently, prices are trapped in a range. On the upside is resistance at $2.964 to $2.982. This is followed by two main tops at $3.035 to $3.042.

On the downside, the support zone is $2.921 to $2.892. This is followed by a main bottom at $2.880.

Earlier in the week, the selling stopped at $2.880 and the buying was strong enough to produce a massive reversal to the upside. This price is a major support number on the chart so it will be interesting to see if buyers will continue to defend it if pressed. If it fails then the next support won’t come in until $2.799.

In other news, a report from natgasweather.com suggests natural gas demand will remain on the low side with temperatures around the country sitting inside the comfortable 70 to 80 degree range.

Thursday’s U.S. Energy Information Administration’s weekly storage report is expected to show utilities injected 38 billion cubic feet of gas into storage during the week-ended August 25. That compares with an addition of 46 bcf a year earlier and a five-year average injection of 67 bcf for the period.

If the forecast is spot-on then total stocks would rise to 3.163 trillion cubic feet. With this number, inventories would come in at about 7 percent below a year earlier and less than 1 percent above the five-year average.

Since the data is old and was collected before Hurricane Harvey, I don’t expect the report to have much of an impact on prices.

Without knowing the extent of the flood damage on infrastructure or a timetable for the return of the refineries, we think natural gas traders will continue to take a “wait and see” approach. I see very little speculation at this time since no one is sure which direction to play.