Natural Gas Price Fundamental Daily Forecast – Models Showing Some Heat for First Week of June

Natural gas futures are trading flat early Friday as buyers failed to follow-through to the upside following yesterday’s potentially bullish closing price reversal technical chart pattern. The move was fueled by a combination of a successful defense of a pair of main bottoms and a government report that showed a smaller-than-expected weekly storage build.

At 09:11 GMT, July natural gas futures settled at $2.592, unchanged.

Traders who bet on a large triple-digit weekly build were forced to cover their ill-timed short positions after the government number came in on the low side of the estimates. Traders also said a forecast for a slightly warmer first week of June encouraged weak shorts to cover their bets. However, gains may have been limited because hot weather in the Southeast was offset by cooler temperatures in the west that held the spot market in check.

U.S. Energy Information Administration Weekly Storage Report

The EIA on Thursday reported a 100 Bcf weekly injection into U.S. natural gas storage for the week-ending May 17. Ahead of the release of the report, traders were pricing in a build of 104 Bcf, with estimates ranging from 99 Bcf to 112 Bcf. EIA data also showed a 93 Bcf injection in the year-ago period and a five-year average 88 Bcf build.

The EIA report also said that injections have topped the comparable five-year average every week since the season’s first net injection, recorded for the period ended March 29, EIA data showed.

Short-Term Weather Forecast

A mid-session forecast from Bespoke Weather Services showed additional heat for the first week in June.

“That has been a subtle trend over the last couple of days, with models tending to weaken the early June cool push, or, at the least, lessening its impact on the southern half of the nation,” Bespoke said. “Nonetheless, we do still anticipate overall demand closer to normal levels as we enter the month of June.”

“From there, we will be monitoring the status of El Nino to see if it is able to re-strengthen, or if it stays weak and closer to a non-signal, which would open the door to some hotter risks in the eastern half of the nation for summer as a whole.”

Daily Forecast

Yesterday’s price action indicates aggressive counter-trend buyers are willing to defend the two bottoms at $2.550 and $2.534, given the current supply and short-term weather conditions.

The daily chart shows buyers are going to have a hard time initiating a rally due to a series of potential resistance levels at $2.609, $2.619, $2.632 and $2.641.

Based on the current set-up, we’re likely to see a rangebound trade until a prolonged period of heat is identified by the weather forecasts.