Natural Gas Price Fundamental Daily Forecast – No Prolonged Rally Until Shorts Are Forced Out

Natural gas futures initially rallied on Thursday, following the release of a government report that showed natural gas in storage fell inside the expected range last week. However, the buying wasn’t strong enough to sustain the move and prices retreated into the close.

The price action strongly suggests there are a lot more shorts in the market than buyers. It also means that the market is not going to have a prolonged rally until these shorts are taken out and the longs take control.

September Natural Gas futures settled at $2.948, down -0.027 or -0.91%.

According to the U.S. Energy Information Administration (EIA), U.S. natural gas in storage rose by 57 billion cubic feet in the week ended July 7. This was slightly above the mid-point of the 51 bcf to 61 bcf range.

Total natural gas in storage now stands at 2.945 trillion cubic feet, 8.9% lower than levels at this time a year ago and 6.2% above the five-year average for this time of year.

Forecast

The price action on Thursday indicates that the market is still in the hands of strong sellers. They didn’t seem to be too impressed by the EIA report and they don’t appear to be too nervous about the weather forecast calling for high to very high natural gas demand in most of the U.S. besides the northeastern U.S.

The weather forecast calling for hot high pressure with highs of 90s and 100s has been in the forecast all week. However, the market is trading only slightly higher for the week. This also points to the shorts being in control.

The market is likely to continue to be rangebound over the near-term unless the shorts increase their positions enough to force the weaker longs out of their positions. If this occurs, we could see a break into $2.830 over the near-term.

In order to breakout to the upside, the news is going to have to be bullish enough to take out the shorts and encourage investors to buy strength by chasing the market higher.

The daily chart indicates that an upside bias could develop on a sustained move over $3.006. Upside momentum will pick up on a move over $3.043 with the next potential targets $3.114 and $3.134.

It also shows that the downside bias will resume on a sustained move under $2.935.

Holding inside $2.935 and $3.006 will create a choppy, two-sided trade.