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James Hyerczyk
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Natural Gas

Natural gas futures are inching higher early Tuesday. Nonetheless, the market remains inside a tight trading range, suggesting investor indecision and impending volatility. The lackluster price action is a bit of surprise, given the bullish weather forecasts and low storage levels. A recovery in spot gas prices also failed to encourage new buying.

At 09:38 GMT, September natural gas futures are trading $3.974, up $0.039 or +0.99%.

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Short-Term Weather Outlook

According to NatGasWeather for August 3 to August 8, “National demand will ease to lighter levels this week as weather systems sweep across the eastern ½ of the U.S. with showers, thunderstorms, and highs of only 70s to lower 80s. The West into Texas and the Plains will be very warm to hot with highs of upper 80s to 100s as strong upper high pressure rules. Temperatures will increase across the South and East late next weekend with highs warming into the mid-80s to lower 90s. Overall, moderate national demand this week, then increasing to high late next weekend.”

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Bespoke Weather Services Expects Heat to Return

Although temperatures are expected to be dampened by a series of wet weather systems sweeping across the eastern half of the country this week, Bespoke Weather Services sees heat returning in a big way by next week. Their analysts see stronger ridging showing up in the latest weather models for the eastern Unites States, which should give a boost to temperatures in the Midwest and East.

“Next week’s peak highs will reach the low to mid-90s for most areas from Chicago to New York City and points south,” Bespoke said. “As the forecast stands currently, this would actually make next week the hottest of the summer, nationally, beating out last week by a few gas-weighted degree days.”

Storage Outlook Still Bullish

Hot temperatures and strong cooling demand are likely to continue to cap storage facilities which are trying to refill supply to levels deemed adequate for the winter season.

Natural Gas Intelligence (NGI) is reporting that Powerhouse Brokerage LLC noted that the average rate of injections into storage is 13% lower than the five-year average so far in the refill season, which runs through October 31. The firm said new demand is outstripping supply, especially for power.

Daily Forecast

The weather forecasts are bullish and storage is low. These are the bullish factors that should launch another leg higher over the near-term.

Traders know the fundamentals, but that can’t seem to pull the trigger at current price levels. A pullback into the support at $3.869 to $3.751 would likely bring in new buyers. If this fails then look for the selling to possibly extend into $3.660 to $3.540.

On the upside, a sustained move over $4.040 will be the first sign that traders are willing to buy strength. However, it may take a turn toward hotter temperatures or forecasts calling for a longer heat dome to encourage this kind of aggressive buying.

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