Natural Gas Price Fundamental Daily Forecast – Strengthens Over $2.296, Weakens Under $2.253

Natural gas futures are trading steady-to-better after yesterday’s steep sell-off as traders continue to try to establish support inside a key technical retracement zone. The tone this week has been bearish, but some speculative buyers are holding on to hope that a late summer heat wave will arrive in time to generate a strong counter-trend rally.

At 12:19 GMT, September natural gas futures are trading $2.268, up $0.005 or +0.22%.

Natural gas prices fell on Thursday despite a lower than expected storage injection. The injection indicated a week/week tightening of balances, but the bearish reaction indicates that traders may be viewing the data as skewed due to the impact of Hurricane Barry, which lead to a shutdown of production in the Gulf of Mexico.

U.S. Energy Information Administration Weekly Storage Report

On Thursday, the EIA reported a slightly below-average 62 Bcf build into U.S. natural gas stocks. This was on the low end of analyst forecasts.

Ahead of the EIA report, traders were looking for this week’s EIA weekly storage report to come at about 72 Billion Cubic Feet (Bcf).

Bloomberg was looking for a median of 69 Bcf with guesses ranging from 64 Bcf to 83 Bcf. Reuters was calling for a 65 Bcf build with guesses ranging from 54 Bcf to 78 Bcf. The ICE EIA Financial Weekly Index futures contract settled Tuesday at 60 Bcf, while Natural Gas Intelligence experts predicted a 65 Bcf injection.

Last year, the EIA recorded a 46 Bcf injection for the period, which covers the week-ended July 12. The five-year average is a build of 63 Bcf.

As of July 12, Total Lower 48 working gas in underground storage stood at 2,533 Bcf, 291 Bcf (13.0%) above year-ago levels but 143 Bcf (minus 5.3%) below the five-year average, according to the EIA.

Short-Term Weather Outlook

According to NatGasWeather for July 17-23, “(Hurricane) Barry will exit the Ohio Valley and Northeast today with showers ending. Hot high pressure will strengthen over the Midwest to Northeast through the weekend with highs of mid-90s from Chicago to New York City, while also hot with 90s across the southern & central US to drive very strong national demand. The Southwest will be very hot with highs of 110-110s, although comfortable across the Northwest with highs of 70s & 80s. Weather systems with showers and cooling will arrive over the Midwest and East early next week, easing highs back into the 70s & 80s. Overall, national demand will be very high through the weekend then easing.”

Daily Forecast

The price action the last four sessions suggests the direction of the September natural gas market on Friday is likely to be determined by trader reaction to the 50% to 61.8% retracement zone at $2.296 to $2.253.

Trading between $2.296 and $2.253 will indicate a neutral market.

Look for a bullish tone to develop on a sustained move over $2.296 and for the bearish tone to continue on a sustained move under $2.253.