Natural Gas Price Fundamental Daily Forecast – Short-Term, Weather-Related Pullback Was Expected

Natural gas futures tumbled on Tuesday, amid profit-taking and updated weather forecasts calling for milder temperatures during the second week of June. The market rallied to a four-month high last week on the back of extremely hot temperatures over most of the country.

July Natural Gas settled at $2.903, down $0.060 or -2.07%.

The return of more seasonal temperatures should lead to lower cooling demand, which should encourage further profit-taking from current price levels.

The updated forecast from NatGasWeather.com for May 29 – June 4 says, “Alberto will bring heavy showers and comfortable temperatures to the Southeast the next few days for light demand. A weather system is currently tracking into the Plains with showers, thunderstorms and cooling. This system will gradually track across the Midwest mid-week, cooling conditions from hot 90s back into the 70s and 80s. The West will also warm this week, hottest over the Southwest into portions of California with 90s. The East will warm late in the week into the 80s to lower 90s, including NYC, so there will remain several regions where demand will be moderate to strong (East and South), preventing builds from exceeding 5-year averages.”

Forecast

At 0511 GMT, July Natural Gas is trading $2.898, down $0.005 or -0.17%. There has been no follow-through to the downside after yesterday’s steep sell-off. Technical factors are playing a role in the early price action.

The main trend is up. The main trend will change to down on a move through $2.804.

The main range is $2.722 to $2.994. Its 50% to 61.8% retracement zone is $2.858 to $2.826. This is the major downside target and support zone. Since the main trend is up, buyers are likely to come in on a test of this area.

The short-term range is $2.804 to $2.994. Its retracement zone at $2.899 to $2.877. This zone was tested on Tuesday. So far it is acting like good support.

This week’s U.S. Energy Information Administration’s weekly storage report is expected to show a build of about 97 billion cubic feet (Bcf) for the week-ending May 25. That compares with a build of 91 Bcf in the preceding week, an increase in 81 Bcf a year earlier and a five-year average rise of 97 Bcf.

Total natural gas in storage currently stands at 1.629 trillion cubic feet (Tcf), according to the EIA. That figure is 804 Bcf, or around 33.0%, lower than levels at this time a year ago, and 499 Bcf, or roughly 23.4%, below the five-year average for this time of year.

As I said at the start of the week, the longer-term picture looks a little bullish because of worries about stronger cooling demand while there remains a storage deficit. Short-term, however, traders are watching next week’s weather forecast and it looks neutral to bearish at this time.

Prices will rebound quickly if the weather guys put heat back into the forecast. Until then, price could drift sideways to lower until they reach an attractive price level.