Natural Gas Price Fundamental Daily Forecast – Strengthens Over $2.226, Weakens Under $2.191

The fundamentals appear to have reached a stalemate, which supports the sideways-to-higher chart pattern. Since the technicals tend to precede the fundamentals, where likely to see the next move determined by chart watchers.
James Hyerczyk
Natural Gas

Natural gas futures are trading nearly flat early Wednesday amid low volume and volatility. However, the tone remains strong for a third day this week with the market being underpinned by “the onset of commercial liquefied natural gas (LNG) export operations along the Gulf Coast,” according to Natural Gas Intelligence (NGI).

At 08:43 GMT, October natural gas futures are trading $2.223, up 0.004 or +0.18%.

Helping to keep a lid on prices, however, is rising production and expectations for lower demand as the long-term weather forecasts call for cooler temperatures.

According to NGI, the start of commercial operations under tolling agreements at the first production unit of Sempra Energy’s Cameron LNG export terminal in Louisiana is providing support. “LNG is making a comeback, with the initial data showing a full 1 Bcf increase day/day,” Bespoke Weather Services chief meteorologist Brian Lovern said.

“Rising production growth continues to weigh heavily on the gas market, with Monday’s revised data showing output at a new all-time high of 93 Bcf/d,” according NGI. “Tuesday’s initial data showed a substantial drop in production, although much of the 3.4 Bcf/d decline can be attributed to pipeline maintenance,” Natural Gas Intelligence said.

Spot prices were mixed on Tuesday, but should come down as cooler weather begins to dampen demand. Providing some support were a series of pipeline maintenance events, which were creating a number of flow restrictions across the country. However, this helped boost prices in some areas while pressuring those in others.

Short-Term Weather Outlook

According to NatGasWeather for August 20 to August 26, “Strong high pressure will dominate the western and southern U.S. with highs of 90s to 100s, hottest from California to Texas for strong demand. High pressure will briefly extend across the Midwest and East today with highs warming into the upper 80s to near 90 degrees Fahrenheit from Chicago to New York City, then cooling Thursday through the weekend as a weather systems arrives with showers and highs of 70s and 80s. Overall, national demand will be high through mid-week then easing to moderate.”

Mid-Term Weather Outlook

Bespoke Weather Services said, “The widespread extreme heat gripping the country and boosting demand is set to begin dissipating midweek, and long-term weather models shifted cooler again Tuesday, with the change occurring in the 11- to 15-day time frame as models converged on a stronger upper level trough moving into the eastern half of the United States. This brings more expansive coverage of below-normal temperatures to the Midwest and parts of the mid-South, with the heat focused in the West to begin in September.”

NatGasWeather said, “The midday run of the Global Forecast System model was a little hotter for early next week because of a break between weather systems over the East. However, it held much cooler pattern east of the Rockies for late August and early September by favoring numerous weather systems arriving with showers, keeping daytime highs in the 70s and 80s.”

Daily October Natural Gas

Daily Forecast

The fundamentals appear to have reached a stalemate, which supports the sideways-to-higher chart pattern. Since the technicals tend to precede the fundamentals, we are likely to see the next move determined by chart watchers.

The intermediate range is $2.338 to $2.045. Its 50% to 61.8% retracement zone is $2.191 to $2.226. Trader reaction to this zone will determine the next move in the market.

A sustained move over $2.226 will indicate the presence of buyers. This could trigger a surge into the main retracement zone at $2.278 to $2.332. Taking out $2.338 could trigger an acceleration to the upside. The daily chart is wide open over this level with $2.510 the next major target.

A sustained move under $2.191 could lead to a labored break with potential targets coming in at $2.159 to $2.132.

The daily chart will open up to the downside under $2.132 with the contract low at $2.045 the next potential target.

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