Natural Gas Price Fundamental Daily Forecast – Massive Builds, Mild Temperatures Weighing on Prices

Natural gas futures are trading slightly higher on Friday. The market is trading inside yesterday’s range which indicates investor indecision. Helping to limit gains are concerns over increasing supply and low demand. In the absence of a major shift in the weather, the market is likely being supported by technically oversold conditions.

At 12:07 GMT, July natural gas futures are trading $2.331, down $0.007 or +0.30%.

On Thursday, the U.S. Energy Information Administration reported another massive storage injection. Additionally, spot gas prices weakened as pockets of hot temperatures failed to overcome the poor demand.

U.S. Energy Information Administration Weekly Storage Report

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.

Bloomberg analysts were looking for injections to range between 103 Bcf to 121 Bcf, with a median of 109 Bcf. Reuters estimated a range of 104 Bcf to 124 Bcf, with a median of 109 Bcf. ICE forecast 110 Bcf and Natural Gas Intelligence was looking for a 111 Bcf build.

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

Short-Term Weather Outlook

NatGasWeather is saying for June 6 to June 12, “A slow moving weather system will track across the South and Southeast the next several days with heavy showers and cooling with highs mainly in the 80s. The Southwest into Texas will still be very warm to hot with highs of upper 80s and 100s.

A weather system across the Northwest will bring cooling, while the rest of the northern US will be most comfortable with 70s and 80s. During the middle of next week, a strong weather system will track across the northern and central US with another round of showers and cooling with highs of 60s and 70s, while also preventing widespread southern US heat with highs of mostly 80s besides the hotter Southwest. Overall, demand will be low.

Daily Forecast

There isn’t much in the weather outlook to support a rally at this time. If there is a sizable move to the upside then it is likely to be technical in nature due to oversold conditions, or aggressive speculative buyers anticipating a shift in the weather forecasts over the weekend.

The latest forecasts call for average temperatures through mid-June, with a hint of heat trying to return around June 18-20. Since traders tend to react to weather forecasts two weeks into the future, they will be keying on this time period.

However, until the forecasts begin to show heat building across the heavily populated southern and eastern United States, we’re going to have to maintain our bearish bias.