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James Hyerczyk
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Natural Gas

Natural gas futures are up sharply at the mid-session on Tuesday following the release of the European Weather model report that showed rising cooling demand expectations.

After posting a weak performance on Monday, prices began to stabilize and move higher during Tuesday’s pre-market session before soaring shortly after the regular session opening at 12:00 GMT. The catalyst behind the price surge was the European weather model that showed a large increase in projected cooling degree days (CDD), analysts at EBW Analytics Group said.

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At 15:34 GMT, July natural gas is trading $3.190, up $0.120 or +3.91%.

EBW Reports Potentially Bullish Weather Development

“Overnight, the European model kept its late-day gains, and the American, while still cooler, posted its own large gain,” the EBW analysts said. “With both models now warmer than during the regular trading session yesterday, the July contract is poised to rise further this morning.”

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NatGasWeather Adds 7 CDDs

According to NatGasWeather, the American weather model added 7 CDD in its overnight run. However, the model showed a pattern that “still wasn’t quite hot enough June 15-20 due to a barrage of weather systems tracking across the Great Lakes and East,” the firm said. “…It’s this rather comfortable pattern over the Great Lakes and eastern third of the U.S. June 15-20 that makes the pattern not as impressive as needed to be considered solidly bullish. But it’s apparently hot enough to satisfy, with prices at multi-week highs.”

Early Look at Energy Information Administration Storage Report

NGI’s model is calling for a 100 Bcf injection for the week-ended June 4. That would compare with a 95 Bcf build recorded a year earlier and a 92 Bcf five-year average injection.

NGI is also reporting that Energy Aspects issued a preliminary estimate for a 111 Bcf injection for the upcoming EIA report.

Issues that Could Cap Gains

Production and liquefied natural gas feed gas demand levels are “the most bearish they’ve been in more than a month,” NatGasWeather said. After this week’s heat it’s “debatable” whether the temperature outlook is “hot enough” given the cooler projections from the American model starting around mid-June.

Daily Outlook

The market is trading on the strong side of a retracement zone at $3.089 to $3.054, making this area new support. It has also put the market in a position to challenge its most recent main top at $3.204. Taking out this level will change the main trend to up with $3.245 the next likely upside target.

The longer-term chart indicates that $3.245 is a potential trigger point for an acceleration to the upside with $3.417 the next major target.

For a look at all of today’s economic events, check out our economic calendar.
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