Natural Gas Price Fundamental Daily Forecast – Sellers Going After Series of Bottoms in Anticipation of Cooler Temps

Natural gas prices are under pressure early Monday amid concerns about rising production and cooler temperatures around mid-month.

At 0638 GMT, August Natural Gas futures are trading $2.903, down $0.021 or -0.72%.

The market is rapidly approaching a series of higher bottoms at $2.896, $2.891 and $2.833 as well as a major technical retracement zone at $2.885 to $2.848. Taking out the bottoms and a failure to hold the zone could trigger an acceleration to the downside.

At the start of the week, total stocks are at 2.074 trillion cubic feet, down 735 billion cubic feet from a year ago, and 501 billion below the five-year average, according to government data.

According to NatGasWeather.com for July 1 to July 7, “Hot high pressure will expand to dominate most of the country this week with highs of upper 80s to 100s for strong demand, including upper 90s Monday for New York City. The cooler exception will be across the northern U.S. Monday as a weak front moves through, including briefly into Chicago, although with intense heat springing right back Tuesday thru Thursday as the ridge builds westward. A weak system will provide minor cooling across the East Friday and next weekend as highs drop into the 70s and 80s. Overall, demand will be high to very high.”

Forecast

The price action early Monday suggests that traders anticipated the heat for the first week of July, making the spot market well-supplied. Potentially pressuring prices were forecasts which showed heat in the short- and medium-term easing off by mid-July.

Above average production and average temperatures will likely limit gains and could put pressure on the market. The daily chart indicates the first sign of weakness will be a break through $2.896. Prices could collapse, however, if sellers come in strong at $2.883. The next major support under this price level is a Fibonacci level at $2.848, followed by the last main bottom at $2.821.

Early estimates for this week’s EIA storage report show traders are looking for an average build of about 73 Bcf for the week-ending June 29, with a median build of 75 Bcf and a range of 57 Bcf to 82 Bcf. Last year, the EIA recorded a 60 Bcf build for the period, and a five-year average build of 70 Bcf.

The size and speed of the potential steep break under support will be determined by the selling volume and the size of the sell-stop orders.