Natural Gas Price Fundamental Daily Forecast – Speculative Buyers Hoping for Increased Heating, Cooling Demand

Natural gas futures are trading higher on Monday after taking out last week’s high and a pair of technical retracement levels. The price action indicates that investors are ignoring expectations of another week of government storage builds, and focusing on increased heating and cooling demand the last two weeks of May.

At 12:08 GMT, July natural gas futures are trading $2.712, up $0.048 or +1.80%.

Short-Term Weather Outlook

According to NatGasWeather for May 20 to May 26, “Weather systems with showers and powerful thunderstorms will impact the West and Plains with slightly cool highs of 50s and 60s. Texas to the Mid-Atlantic Coast will be very warm to hot with highs of mid-80s to 90s as high pressure strengthens, hottest over the Southeast. A weather system with showers will impact the Great Lakes & Northeast Monday and Tuesday, but overall mostly comfortable from Chicago to New York City with highs of 60s to 80s. Overall, demand will be moderate due to hot conditions over the southern U.S.

Daily Forecast

Today’s price action is going to be generated by a combination of fundamental and technical factors.

Fundamentally, speculators will be driving the upside price action as they continue to increase long bets on rising heating and cooling demand this week. The weekend weather data and this week’s early data is expected to add a little more demand through next weekend.

Power burns are expected to increase this week as upper high pressure strengthens across the South and Southeast U.S. where highs of 90s will become widespread from Texas to the Mid-Atlantic Coast.

Technically, the main trend is up according to the daily swing chart. The uptrend was reaffirmed earlier today when buyers took out the previous main top at $2.700. The new swing bottom is $2.621. A trade through this level will change the main trend to down.

The shorter-term range is $2.824 to $2.534. Its 50% to 61.8% retracement zone is $2.679 to $2.713. Natural gas is currently straddling this zone. Trader reaction to this zone will determine the near-term direction of the market.

A sustained move over $2.713 will indicate the buying is getting stronger. This could trigger a further rally into the longer-term 50% level at $2.762. Taking out and sustaining a break under $2.679 will signal the return of sellers.