Natural Gas Price Fundamental Daily Forecast – Sellers in Control as Heat Forecast Shifts from Late May to Early June

Natural gas futures are following up yesterday’s sharp sell-off with another steep move on Wednesday. The selling pressure is being fueled by long liquidation after the weather services shifted forecasts for hot temperatures from late May to early June. There were no major changes in the forecasts overnight. Nonetheless, just the mere mention of a change in the outlook is shaking out weak speculative buyers while attracting fresh short-sellers.

At 13:30 GMT, July natural gas futures are trading $2.610, down $0.031 or -1.17%.

“No major changes overall as hot conditions will continue across the southeastern U.S. into the middle of next week with widespread highs of 90s for strong power burns,” the forecaster said. “However, the data held a rather bearish setup for the start of June, with high pressure weakening, easing heat across the southern U.S.”

“…Stronger demand trends could certainly occur over time, like what’s occurred the past several weeks, although that would need to show up in the weather data soon. With prices selling off yesterday and back under $2.62, bulls appear to have ceded momentum back to bears, at least temporarily.”

Technically, the main trend changed to down on Wednesday when sellers took out the last swing bottom at $2.621.

The main range is $2.534 to $2.731. Its 50% to 61.8% retracement zone is $2.632 to $2.609. Trader reaction to this zone will determine the near-term direction of the market.

Daily Forecast

The sell-off has been impressive, but the two main bottoms remain intact at $2.550 and $2.534. Based on the early price action, the direction of July natural gas the rest of the session on Wednesday is likely to be determined by trader reaction to $2.609.

A sustained move under $2.609 will indicate the selling pressure is getting stronger. Overcoming and sustaining a move over $2.609 will signal the return of buyers and may be signaling that the worst of the selling is over. However, don’t expect a strong retracement to the upside unless buyers can take out $2.641.

The worst scenario for the bears today will be a continuation of the selling under $2.609. If this occurs then buyers will eventually face a wall of resistance at $2.609, $2.619, $2.632 and $2.641.

At this time, I’m assuming that the market is making an adjustment to the change in the weather forecast. If I understand the reports correctly, the forecast for heat wasn’t eliminated, but rather moved from late May into early June. This could just be a timing issue for the bulls, who may regroup on his correction and re-enter at better prices.