Natural Gas Price Fundamental Daily Forecast – Strengthens Over $1.786, Weakens Under $1.738

Natural gas futures are inching higher in a lackluster trade, following a dramatic reversal to the downside the previous session despite the release of a smaller than expected weekly storage build. Traders blamed demand worries for the move as surging coronavirus infections across the United States threatened to derail the economic and energy recovery.

At 08:56 GMT, September natural gas futures are trading 1.777, up 0.001 or +0.06%.

US Energy Information Administration Weekly Storage Report

The EIA reported Thursday that domestic supplies of natural gas rose by 45 billion cubic feet for the week-ended July 10. That was smaller with the average increase of 50 billion forecast by analysts polled by S&P Global Platts.

The latest EIA injection number compares with a 67 Bcf storage build in the same week in 2019 and a five-year average injection of 63 Bcf.

Total Stocks now stand at 3.178 trillion cubic feet trillion cubic feet, up 663 billion cubic feet from a year ago, and 436 billion cubic feet above the five-year average, the government said.

Short-Term Weather Outlook

According to NatGasWeather for July 17 to July 23, “Very hot upper high pressure continues to stretch from California to Texas with highs of upper 90s-110s, while hot and humid across the South and Southeast with mid-90s. A cool shot will keep the Northern Plains comfortable with highs of 70s to low 80s, while hotter conditions spread across the Great Lakes and Northeast Friday to Monday with highs of upper 80s to 90s gaining in coverage for stronger national demand. Very warm to hot conditions will also impact the Northwest this weekend and early next week with highs of upper 80s to 90s.”

Short-Term Outlook

Thursday’s EIA report was not bad so the sell-off was a bit of a surprise and maybe an overreaction to coronavirus concerns. The weather models may be showing a moderation in temperatures, but it is still going to be hot as we move into August. This could help put in a floor.

Over the near-term, trader reaction to 1.786 to $1.758 should determine the direction.

An upside bias could develop on a sustained move over $1.786, while the downside bias will resume on a sustained move under $1.758.

The weather demand is expected to be there which could be just enough to provide support and perhaps produce a decent short-term rally, however it is going to take a resurgence in commercial and industrial demand amid increased economic activity to change the longer-term trend to up.