Natural Gas Price Fundamental Daily Forecast – Reaction to $2.619 to $2.635 Determines Today’s Direction

Natural gas futures are inching higher early Thursday after a strong reversal to the upside following a smaller than expected storage injection the week before, according to a government report. Early in the session, the market was under pressure as traders started setting up the expected correction after the recent short-covering rally. The surprise in the government report sparked an intraday short-covering rally that forced fresh short-sellers to wait another day.

At 09:34 GMT, November natural gas futures are trading $2.612, up $0.007 or +0.27%.

In other news, cooler temperatures drove Northeast discounts in the spot market, while hotter temperatures pushed Southern California prices higher.

U.S. Energy Information Administration Weekly Storage Report

The EIA reported Thursday that domestic supplies of natural gas rose by 78 billion cubic feet for the week-ended September 6.

Traders were looking for the EIA storage report for the week-ending September 6 to show another above-average build.

Bloomberg analysts estimated a median build of 81 Bcf with a range of 75 Bcf to 91 Bcf. Reuters analysts forecast an 82 Bcf injection, with a range of 76 Bcf to 94 Bcf. Intercontinental Exchange EIA Financial Weekly Index futures settled Tuesday at 83 Bcf. Natural Gas Intelligence’s model predicted an 86 Bcf injection. Energy Aspects issued a preliminary estimate of 86 Bcf for this week’s report.

Total stocks now stand at 3.019 trillion cubic feet, up 393 billion cubic feet from a year ago, but 77 billion below the five-year average, the government said.

Short-Term Weather Outlook

According to NatGasWeather for September 13 to September 19, “Unseasonably strong high pressure will dominate the southern and eastern/east-central US with highs of 80s and 90s for strong late season demand into the weekend.

However, a tropical system will track across Florida and portions of the South and Southeast this weekend and next week, easing highs into the 70s and 80s. The Northwest, Rockies, and North Plains will be comfortable to mild with highs of upper 50s to 70s for light demand.

The important corridor from Chicago to NYC will be mostly comfortable with highs of 70s to mid-80s. Overall, demand will be high across the southern US and up the East Coast and moderate-low across the rest of the US.

Daily Forecast

Technically, the main trend is up, but momentum shifted to the downside on September 10 with the formation of the closing price reversal top at $2.685 and its subsequent confirmation. A trade through $2.685 will negate the chart pattern and could signal the resumption of the uptrend. A trade through $2.551 will indicate the selling is getting stronger.

The new short-term range is $2.685 to $2.551. Its 50% to 61.8% retracement zone at $2.619 to $2.635 is currently being tested. Sellers could come in on a test of this zone in an effort to form a secondary lower top.

Our eventual downside target is $2.410 to $2.345.

If the tropical storm hits Florida then we could see a drop in demand, which could help accelerate the selling pressure. If the storm move into the Gulf of Mexico and strengthens then this could be a bullish development next week since it could pose a threat to natural gas infrastructure near Louisiana and Texas.