Natural Gas Price Fundamental Daily Forecast – Pressured by Forecasts of Cooler Temperatures

Natural gas futures tumbled on Wednesday on concerns that below-normal temperatures through the first week of September would weigh on demand. A new weather model suggests a pattern of cool temperatures across the eastern two-thirds of the nation.

October natural gas futures settled at $2.960, down $0.008 or -0.27%.

According to a U.S. weather model, temperatures are likely to remain lower than usual for this time of the year over the next couple of weeks.

Forecast

Despite the shift in the weather model, the return of cooler temperatures may not necessarily be bearish for prices. It may put a lid on the market, but it probably won’t mean a test of the recent bottoms. This is because summer demand is already winding down so the effect of cooler temperatures will be minimal.

U.S. gas consumption is likely to fall to 72.9 billion cubic feet per day next week from around 77.3 bcfd this week.

Thursday’s U.S. Energy Information Administration’s weekly inventories report is expected to show a 40 billion cubic feet build during the week-ending August 18. That compares with an injection of 12 bcf for the same week a year ago and a five-year average addition of 53 bcf. If correct, total stocks would rise to 3.1222 trillion cubic feet.

That would put inventories about 7 percent below the same week a year ago and just 1 percent above the five-year average for the period.

The report may take a backseat due to a weather system developing near the Gulf Coast.

According to CNBC, Tropical Depression Harvey is expected to again become a tropical storm by Thursday, as it heads towards the Gulf Coast, and could become a Category 1 hurricane by Friday.

The storm’s track, while still unpredictable, appears to be heading towards the Houston area and western Louisiana, where it could dump two feet or more of rain.

Gasoline prices are feeling the earliest impact, jumping higher late Wednesday/early Thursday. Traders expect more upward pressure on gasoline futures as the storm gets closer to Texas.

We haven’t seen any reaction in natural gas yet, but it should be monitored.

Looking at the chart pattern, a sustained move over $2.982 will indicate the presence of buyers. A sustained move under $2.964 will signal the presence of sellers.