Natural Gas Price Fundamental Daily Forecast – Stimulus Expectations, Fed Likely Catalysts Behind Rebound

Natural gas futures are rebounding on Tuesday from yesterday’s setback that was fueled by the emergence of cooler temperatures due to the impact of the passing hurricane in the Gulf of Mexico. Although Hurricane Hanna failed to generate any noticeable damage to production facilities, it was powerful enough to sweep away some of the heat-related demand in the area, at least temporarily.

Natural Gas Intelligence reported that Bespoke Weather Services less intense heat moderating cooling demand in coming days.

“The bulk of the cooler changes come in the central U.S., running from the Plains over into the Midwest, the forecaster said. “This is the region where models have had the highest hot bias over the last several weeks. Total demand remains forecast to be above normal for the 15-day period as a whole, but not by much, as the intensity of the pattern has fallen well off levels seen for most of this month to date.”

Bespoke said August temperatures are expected to climb above normal for the month overall, but projections through the first third of the month do not show any “risks for strong heat” and gas-weighted degree day levels “begin to decline after the first few days of August, so it is likely that we have seen peak heat on the national level, in absolute terms.”

Short-Term Weather Outlook

According to NatGasWeather for July 28 to August 3, “Showers continue along the Gulf Coast with highs of mid-80s. A second system continues across the Midwest with showers and pleasant highs of 70s-80s. The rest of the U.S. is quite hot with mid-90s over much of the South and East including major Northeast cities. It’s also hot over the West and Northwest with 90s and 100s, aiding strong national demand. However, cooling over the Midwest will reach the Northeast Wednesday – Saturday, easing national demand.

Daily Forecast

With the weather looking a little less-friendly over the short-run, and coronavirus cases still threatening to shut down parts of the country, we’re going to go out on a limb and say today’s early short-covering rally may be getting fueled by expectations of another round of fiscal stimulus by the end of the week, and an anticipated dovish message from the U.S. Federal Reserve.

This news could provide support over the near-term and may be just enough to spook a few of the weaker shorts out of the game, but we’re not likely to see a prolonged rally unless we see heat-related demand like we saw in July and the coronavirus case curve starts to flatten.

We could see a rally into $1.785 to $1.848 today. That’s a key retracement zone. But things are likely to get too exciting on the upside until there is a close over $1.848. This would indicate the buying is getting stronger.

For a look at all of today’s economic events, check out our economic calendar.