Natural Gas Price Fundamental Daily Forecast – Stockpiles Only 3% Above Five-Year Average

Natural gas prices retreated on Thursday and are continuing the move early Friday after the U.S. Energy Information Administration (EIA) reported yesterday that U.S. natural gas stocks increased by 20 billion cubic feet for the week-ending July 28. Traders were looking for a reading of about 22 BCF.

September Natural Gas futures settled at $2.800, down $0.011 or -0.39%.

The EIA draw may have been greater than the mid-point of the estimates, but it was not enough to get bullish traders excited enough to challenge the huge short position in the market. Besides, the data is stale and most traders are focusing on the two-week weather forecast that doesn’t bode well for bullish investors.

In other news, the EIA said the five-year average for the week is an injection of 44 billion cubic feet, and last year’s storage withdrawal for the week totaled 6 billion cubic feet.

Additionally, stockpiles fell week over week to 8.5% below last year’s level, but they remain 3% above the five-year average.

The EIA reported that U.S. working stocks of natural gas totaled about 3.010 trillion cubic feet, around 87 billion cubic feet above the five-year average of 2.923 trillion cubic feet and 279 billion cubic feet below last year’s total for the same period. Working gas in storage totaled 3.289 trillion cubic feet for the same period a year ago.

Forecast

Prices may trade sideways to lower over the near-term because domestic demand for natural gas over the next two weeks is expected to fall into the moderate range, ending a three-week period of high demand.

Cooler air is expected to seep into the Midwest over the next two days then move slowly to usually high demand areas in the East and South. This should hold temperatures in a comfortable range as well as demand.

Keep an eye on the stockpiles number the next few weeks. This is the number that should fuel a rally this winter. Start watching the deferred contracts.