Natural Gas Price Fundamental Daily Forecast – Strengthens Over $1.848, Weakens Under $1.785

Natural gas futures are edging lower on Wednesday shortly after the opening as LNG and production changes help put a lid on the three day rally. On Tuesday, prices jumped on increased cooling demand.

Also on Tuesday, a report issued by Global Energy Monitor said, a “perfect storm” of oversupply, low prices and the COVID-19 pandemic has snarled billions of dollar’s worth of liquefied natural projects, creating a bubble that could burst if the outlook doesn’t improve on multiple fronts.

At 13:35 GMT, August natural gas futures are trading $1.851, down 0.0025 or -1.33%.

EIA Trims Gas Production Forecasts Once Again on Lower Prices, Curtailments

The U.S. Energy Information Administration on July 7 again lowered its estimates for natural gas marketed production for the rest of 2020, pointing to low gas and oil prices and production curtailments, but it anticipated a pickup in production toward the second half of 2021, as prices rebound, S&P Global Platts reported.

The agency, in its July Short-Term Energy Outlook, lowered by 830 MMcf/d to 94.15 Bcf/d its gas marketed production estimate for the US in the third quarter of 2020, and trimmed Q4 estimates as well by 390 MMcf/d to 92.16 Bcf/d.

“EIA forecasts that U.S. natural gas production will decline 3% in 2020 as a result of decreased drilling activity and production curtailments caused by falling natural gas prices,” said EIA Administer Linda Capuano, in a statement accompanying the outlook’s release.

Capuano also noted that in June, weak demand offset production prices to keep Henry Hub prices low. Henry Hub natural gas spot prices averaged $1.63/MMBtu in June, the lowest average price since at least 1989.

But the agency forecast that declining production will put upward pressure on gas prices through the end of 2021. Henry Hub spot prices are forecast to average $1.93/MMBtu for full-year 2020 and $3.10/MMBtu in 2021, altered from the previous month’s estimate of $2.04/MMBtu and $3.08/MMBtu, respectively.

In the near term, EIA lowered its forecast for Q3 Henry Hub spot prices by 25 cents to $1.65/MMBtu, and the Q4 forecast fell 16 cents from the previous month’s estimates to $2.46/MMBtu.

Daily Forecast

The main trend is up according to the daily swing chart. A trade through $1.924 will signal a resumption of the uptrend, but main tops at $1.960 and $2.053 could offer resistance.

The main range is $2.447 to $1.517. Its retracement zone at $1.982 to $2.092 is a major upside target that could attract a lot of short-sellers.

The short-term range is $1.517 to $1.924. Its retracement zone at $1.721 to $1.672 is the best downside target.

The retracement zone at $1.848 to $1.785 could control the price action on Wednesday. A sustained move over $1.848 will indicate the presence of strong buyers, while a sustained move under $1.785 will indicate the return of strong sellers.

So far during the rally, we have seen no evidence of a “flip” to the long side by the major players. Most of the rally has been fueled by short-covering by the weaker players.

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