Natural Gas Price Fundamental Daily Forecast – Needs Heat in the Forecast to Continue Rally

Natural gas futures rose to a four-week high on Thursday after government data showed that domestic supplies rose less than forecast last week. However, concerns over future demand due to the weather, helped trigger a late session sell-off.

Thursday’s weak close is encouraging further selling pressure early Friday. At 0600 GMT, the August Natural Gas futures contract is trading $3.029, down 0.013 or -0.43%.

According to the U.S. Energy Information Administration, natural gas in storage in the U.S. rose by 46 billion cubic feet in the week-ending June 23. Traders were estimating a 52 Bcf build.

That build compared with a gain of 61 billion cubic feet in the preceding week, an increase of 37 billion a year ago and a five-year average rise of 72 billion cubic feet.

The EIA also said that total natural gas in storage currently stands at 2.816 trillion cubic feet. That is 10.2% lower than levels at this time a year ago but 6.4% above the five-year average for this time of year.

Forecast

The price action suggests that investors may have fully priced in expectations of higher demand next week due favorable weather conditions. This could lead to a short-term correction into $2.999 to $2.969.

A pull-back into this price zone will represent decision time for traders because bullish traders will have to decide if they want to take this market higher from a favorable price zone, and bearish traders will have to decide if they want to sell through this zone.

If buyers come in on a test of the value zone at $2.999 to $2.969 then natural gas may make another run at breaking out over a key top at $3.127. This could generate the momentum needed to trigger a rally into at least $3.234.

If sellers retake control then look for a steep break under $2.969. This will indicate that investors will be going after $2.875. It will also make $3.127 and $3.122 an important double-top.

With traders seemingly accepting the current weather forecast, it is going to take a new forecast calling for extreme heat to encourage additional speculative buying, otherwise, we could return to a rangebound trade.