Natural gas futures jumped on Monday, boosted by forecasts of building heat across major areas of the U.S., which is likely to boost-power-burn demand.
July Natural Gas futures settled at $2.859, up $0.034 or +1.19%.
Since weather is controlling the price action, let’s take a look at a couple of forecasts.
The latest forecasts from the National Weather Service show above-average temperatures across most of the Eastern and Western U.S. in the six-to-10-day period, leaving normal temperatures across portions of the central and Southwest and below-average temperatures confined to an area of southern California and Arizona in the West, as well as Nebraska.
Above-average temperatures overtake all but small areas of the Northeast and north central U.S. in eight-to-14-day period.
NatGasWeather.com, for the period May 15 to May 21 says, “Weak weather systems will bring areas of showers across the northern U.S. the next several days but with highs still mainly in the 70s. It remains warm with 70s and 80s over the middle of the country, while very warm over the southern U.S. with 80s to lower 90s. There will be heavy showers over portions of the Southeast as low pressure system stalls, but still quite warm. Over the West, it will be warm over the Northwest and Southwest with 70s to 90s, while unsettled and cooler over the Sierra/Great Basin. Overall, demand will be low to locally moderate.”
Additionally, the U.S. Energy Information Administration said higher temperatures in the week to May 9 meant power burn was up 14% week on week.
Forecast
Upside momentum appears to be building as bullish speculators continue to increase bets that the expected weekly injections are not going to be enough to fill the supply gap left by the extended winter before the hot weather returns.
Early estimates for this week’s EIA forecast call for a 105 Bcf storage build.
On Monday, the market closed on the bullish side of a pair or retracement zones. This is helping to give natural gas an upside bias.
The first support is $2.841, followed by $2.817, $2.800 and $2.771.
The main trend will change to up on the daily chart on a move through $2.878. This could trigger an acceleration to the upside with $2.919 the next major target.