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

Natural gas futures are trading lower after failing to follow-through to the upside after Thursday strong rally was fueled by a weaker-than-expected government storage report. Today’s early price action suggests that yesterday’s move was a “one-and-done”, and that traders have already moved on to current and future events. While yesterday’s rally was impressive on the daily chart, the move was fueled by short-covering rather than new buyers.

At 08:50 GMT, October natural gas is trading $2.207, down $0.030 or -1.34%.

U.S. Energy Information Administration Weekly Storage Report

On Thursday, the EIA reported that domestic supplies of natural gas rose by 49 billion cubic feet for the week ended August 9. Traders were looking for an average increase of 59 billion cubic feet. That compares with last year’s 35 Bcf injection and the 49 Bcf five-year average, according to the EIA.

Total stocks now stand at 2.738 trillion cubic feet, up 357 billion cubic feet (Bcf) from a year ago, but 111 Bcf below the five-year average, the government said.

Short-Term Weather Outlook

According to NatGasWeather for August 14 to August 20, “Strong high pressure will dominate the southern US with highs of 90s to 100s, hottest over the Southwest & Texas for strong demand. Weather systems with cooling will sweep across the Midwest and Northeast through the weekend with highs of 70s and 80s for only light to moderate demand. However, hotter temperatures will spread across the northern US next week with highs of upper 80s to lower 90s gaining in coverage. Overall, demand will be moderate-low across the northern US and high across the southern US.

Daily Forecast

For Friday, NatGasWeather says, “Only slight changes in the overnight weather data besides the European model that had been hotter than the rest but trended notably cooler, losing nearly 11 CDD’s (Cooling Degree Days) vs 24-hours ago. Overall, we still expect a hot pattern for much of the country late this weekend through mid-next week, although the data has been cooler trending late next week through August 30^th, favoring weather systems and cooling across both the northern and southern US in a still not nearly hot enough pattern. Essentially, weather sentiment remains bullish on the front but bearish biased by late next week. “

The new weather forecast indicates investors should be prepared for a two-sided trade. However, the pattern may have already started.

The main range is $2.510 to $2.045. Its retracement zone at $2.278 to $2.332 is resistance. Thursday’s rally stopped just short of this target at $2.273.

The intermediate-term range is $2.338 to $2.045. Its retracement zone at $2.191 to $2.226 is currently being tested. Trader reaction to this zone should determine the direction of the market today.

The short-term range is $2.045 to $2.273. Its retracement zone at 2.159 to $2.132 is the next potential downside target.