Natural Gas Price Fundamental Daily Forecast – Pressured by Storage Build, Propped Up by Cooling Demand

Natural gas futures are trading lower on Friday following yesterday’s release of a report showing a bigger-than-expected gas storage build last week due to the ongoing outage at the Freeport liquefied natural gas (LNG) export plant in Texas.

Despite today’s setback, the market is still up for the week amid a drop in daily gas output over the past few days and forecasts for hotter weather and more demand over the next two weeks than previously expected.

At 12:40 GMT, September natural gas futures are trading $6.412, down $0.099 or -1.52%. On Thursday, the United States Natural Gas Fund ETF (UNG) settled at $22.71, up $0.28 or +1.25%.

US Energy Information Administration Weekly Storage Report

The U.S. Energy Information Administration (EIA) on Thursday said utilities added 58 billion cubic feet (Bcf) of gas to storage during the week ended July 8.

That was in line with the 58 Bcf build analysts forecast in a Reuters poll and compares with an increase of 49 Bcf in the same week last year and a five-year average increase of 55 Bcf.

Total working gas stocks in storage stand at 2.369 trillion cubic feet, down 252 billion cubic feet from a year ago and 319 billion cubic feet below the five-year average, the EIA said.

Analysts said the build was bigger than normal due to the ongoing outage at Freeport. It left more gas in the United States for utilities to refill low stockpiles, Reuters reported. That storage build came despite extreme heat last week that forced generators to burn lots of gas to keep air conditioners humming, Reuters added.

Near-Term Weather Outlooks

Accuweather said aside from short-lived reprieves, the oppressive heat that has dogged Texas and most of the South this summer will persist through late July and into August.

In Texas, for example, the firm noted that Austin and San Antonio are enduring their hottest summers on record – at least so far.

A “dome of high pressure that has been a mostly permanent fixture across the South Central states” is trapping in hot air and bolstering temperatures into the triple-digits, AccuWeather meteorologist David Houk said.

Rystad Energy analyst Ryan Kronk said, “Too add insult to injury, the summer months have barely just started and higher temperatures are all but certain in late July and early August.”

NatGasWeather said, the “impressively hot” temperatures in the outlook for the back half of July and week/week production weakness support a bullish case. The firm said forecasts point to “widespread heat” and “strong to very strong” demand for natural gas nationally from this weekend through July 27.

Technically Speaking…

September natural gas is currently straddling the upper level of a key retracement zone at $6.557 to $5.839. This area is controlling the near-term direction of the market.

Look for an upside bias on a sustained move over $6.557. A trade through $6.812 will change the main trend to up. This could trigger an acceleration to the upside with $7.461 to $7.965 the next major target.

A sustained move under $6.557 will be a short-term sign of weakness with $5.839 the next key target. A trade through this price could trigger an acceleration to the downside.