Natural Gas Price Fundamental Daily Forecast – Mixed-to-Bearish Weather Forecast Leads to Sideways-to-Lower Trade

Look for a potential upside bias to begin on a sustained move over $2.226 and for the downside bias to resume on a sustained move under $2.132.
James Hyerczyk
Natural Gas

Natural gas futures are trading lower but trying to claw back its earlier losses. Traders are reacting to the two-sided weather forecast calling for heat until about Wednesday then a cooling off until perhaps August 30.

NatGasWeather points out blistering conditions in Texas and out West, but cooler-trending weather outlooks for the rest of the country. On Friday, they said both the American and European models were cooler overnight, with the latter model making the biggest shift as it lost more than 10 cooling degree days (CDD).

“Essentially, weather sentiment remains bullish on the front but bearish biased by late in the week,” NatGasWeather said.

At 13:50 GMT, October Natural Gas is trading $2.175, down $0.032 or -1.45%.

Record production is also weighing on prices, according to Genscape.

“We estimate Lower 48 output breached the 92 Bcf/d mark for the first time in history, coming in at 92.04 Bcf/d,” senior natural gas analyst Rick Margolin said. “This is the 10th time since July 1 that a new daily high has been established. Today’s estimate is only slightly lower at 91.86 Bcf/d, but most weekday top-day estimates have been revised up in subsequent reporting cycles lately.”

U.S. Energy Information Administration Weekly Storage Report

On August 15, the EIA reported that domestic supplies of natural gas rose by 49 billion cubic feet for the week ended August 9. Traders were looking for an average increase of 59 billion cubic feet. That compares with last year’s 35 Bcf injection and the 49 Bcf five-year average, according to the EIA.

Total stocks now stand at 2.738 trillion cubic feet, up 357 billion cubic feet (Bcf) from a year ago, but 111 Bcf below the five-year average, the government said.

Short-Term Weather Outlook

According to NatGasWeather for August 19 to August 25, “Strong high pressure will dominate the western and southern US with highs of 90s to 100s, hottest from California to Texas for strong demand. High pressure will briefly extend across the Midwest and Northeast through mid-week with highs warming into the upper 80s to near 90 degrees F from Chicago to NYC, then cooling Thursday through next weekend as weather systems arrive with showers and highs of 70s and 80s. Overall, national demand will be high through mid-week then easing to moderate.”

Daily Forecast

The main trend is down according to the daily swing chart. A trade through $2.045 will signal a resumption of the downtrend. The main trend will change to up on a trade through $2.338.

The new minor top is $2.273. A trade through this level will change the minor trend to up. This will also shift momentum to the upside.

The market is also bouncing around a pair of technical retracement zones at $2.191 to $2.226 and $2.159 to $2.132. Trading between these retracement zones may be an indication that traders have priced in the two-sided weather forecast.

Look for a potential upside bias to begin on a sustained move over $2.226 and for the downside bias to resume on a sustained move under $2.132.

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