Natural Gas Price Fundamental Daily Forecast – Needs High Pressure Dome Heat to Save It

Natural gas futures plunged on Wednesday amid concerns over lower demand due to a bearish weather forecast. The selling pressure was strong enough to take out the June 22 bottom at $2.875, but stopped just short of the November 9, 2016 bottom at $2.815.

August natural gas futures settled at $2.840, down $0.144 or -4.83%.

The new forecast for July 5 to July 11 is in and it shows cooler temperatures in a couple of highly populated areas.

According to natgasweather.com, “Temperatures of upper 80s to 100s will cover much of the country this week for strong national demand as high pressure dominates. The exception will be over the Ohio Valley and Northeast where weather systems will arrive late this week through the weekend with showers and slightly cooler than normal temperatures. Overall, natural gas demand will be high besides the northeastern U.S.”

The forecast at the start of the week called for warmer temperatures for Friday to Monday. This has been taken out, likely fueling Wednesday’s steep break. This change also changed demand from “increasing to high” to “high besides the northeastern U.S.” The problem with this is that the northeast U.S. is a highly populated area. So lower temperatures equals lower demand.

Forecast

As I said earlier in the week, bullish traders are going to have a hard time taking on large positions as long as the weather forecasts leave out “hot” and “lingering”. Investors need temperatures to get hot and stay hot. Periodic bursts of heat are going to fuel upside spikes in the market, but nothing sustainable.

Last week, the U.S. Energy Information Administration’s (EIA) weekly storage report showed total natural gas in storage currently stands at 2.816 trillion cubic feet. This 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.

Friday’s EIA report is expected to show a build of about 63 billion cubic feet for the week-ended June 30. This compares with a gain of 46 billion cubic feet in the preceding week, an increase of 39 billion a year earlier and a five-year average rise of 66 billion cubic feet.

Oversold technical conditions and position-squaring ahead of the EIA report could trigger a short-covering rally, but it is not expected to amount to anything major without “heat” in the forecast. What the bullish traders need is a good old-fashioned “high pressure dome”.