Natural Gas Price Fundamental Daily Forecast – May Have to Test $7.372 – $6.888 to Attract New Buyers

Natural gas futures are inching higher on Wednesday, slightly above a short-term support area. The price action has been disappointing since July 26 when the market seemed poised to breakout to the upside and challenge the elusive $10.00 level.

Instead, it ran into a wall of short-sellers who are now controlling the price action. Buyers in the meantime are scarce as output rises and uncertainty grows over the intensity of the expected mid-month heat.

At 12:32 GMT, September natural gas futures are trading $7.777, up $0.071 or +0.92%. On Tuesday, the United States Natural Gas Fund ETF (UNG) settled at $26.41, down $2.09 or -7.33%.

Despite the forecasts calling for heat and worries about an undersupplied winter heating season, gas speculators boosted their net short futures and option positions on the NYMEX and Intercontinental Exchanges to the most since March 2020, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders.

That’s what may be holding back the market. Something has to happen to chase the shorts out of the market or prices are going to continue to fall while traders seek value zone support.

The nearest target is the short-term retracement zone at $7.372 to $6.888. The intermediate support is $6.557 to $5.839.

US Energy Information Administration Weekly Storage Report

Thursday’s EIA weekly storage report is expected to show a build of 25 Bcf for the week-ending July 29.

The U.S. Energy Information Administration reported last Thursday that domestic natural-gas supplies rose by 15 billion cubic feet for the week ended July 22. That compared to an average forecast for an increase of 25 billion cubic feet from analysts polled by S&P Global Community Insights.

Total working gas stocks in storage stand at 2.416 trillion cubic feet, down 293 billion cubic feet from a year ago and 345 billion cubic feet below the five-year average, the government said.

Short-Term Weather Outlook

According to NatGasWeather for August 3-9, “A weather system with showers will track across the Upper Midwest today with highs of 70s and 80s. The rest of the U.S. will be under strong upper high pressure with highs of 90s-100s, hottest California to Texas.

Hot high pressure will continue to rule nearly the entire U.S. through mid-next week with highs of 90s and 100s besides 80s near the Canadian border.

Overall, strong to very strong national demand.

Short-Term Outlook

When prices started to retreat after hitting $9.419, the question was raised, “Buy strength” or “Play for a Pullback?”

The price action suggests traders don’t believe in this market enough to chase it higher so we’re going to be looking for signs of buying on a test of $7.372 to $6.888 or $6.557 to $5.839.