Natural Gas Price Fundamental Daily Forecast – Strengthens Over $3.089, Weakens Under $3.054

Natural gas futures are edging lower on Wednesday after spiking into their highest level since May 18 the previous session. The move was fueled by a drop in supply over the weekend and a jump in spot gas prices. Today’s early weakness suggests there may have been a slight change in the 10-15 day weather forecast overnight.

At 12:25 GMT, July natural gas futures are trading $3.079, down $0.025 or -0.81%.

Over the last few weeks, bullish traders have been building a support base on the back of strong liquefied natural gas (LNG) export demand and weak production. However, gains have been capped by seasonal weather patterns. That is until this weekend when several weather services began to see potentially bullish weather patterns developing.

Bespoke Weather Services Outlook

“Basically, weather is about as bullish as it can get, and even though weather is not known as the driver of prices in the warm season, as it often is in winter, at this magnitude, it certainly cannot be ignored,” said Bespoke Weather Services.

The forecaster said the 15-day outlook turned “notably hotter” over the weekend, particularly in the six- to 10-day period in the Midwest and East. The firm said some 90-plus degree high temperatures are now expected as far north as Minneapolis to Boston in that time frame, Natural Gas Intelligence (NGI) reported.

This boosts gas-weighted degree days (GWDD) to “near-record levels” on at least a couple of days early next week, despite the fact that the West cools off after the next few days and there is no notable heat (relative to normal) in Texas and much of the South, according to Bespoke.

“with GWDDs running just over 20 above normal over the next 15 days, assuming the current forecast is correct, a back half of June that is just near the five- or 10-year normal would be within a few GWDDs of the hottest on record, based on the national GWDD count, quite an impressive feat if it holds,” the forecaster said. “Intensity of heat does lower somewhat in the 11- to 15-day, but not yet even back to normal levels.”

NatGasWeather Outlook

According to NatGasWeather for June 2-8, “National demand will be light through Saturday as weather systems bring showers and pleasant highs of 60s-80s east of the Rockies, including 70s-80s over Texas. The West remains hot as strong high pressure produces highs of mid-80s to 100s, hottest over California and the Southwest. Upper high pressure will expand across most of the U.S. this weekend with highs of mid-80s to lower 90s, with hotter 100s across the Southwest. Showers and cooling will push into the West this weekend with highs of 60s and 70s to end the current heatwave. Overall, low demand through Friday, then increasing to high for next week.

Short-Term Outlook

A bullish pattern may be developing but it all depends on trader reaction to a short-term retracement zone at $3.054 to $3.089. This zone is controlling the near-term direction of the market.

Look for an upside bias to develop on a sustained move over $3.089 with the first objective $3.204, followed closely by $3.245.

A slight downside bias could develop on a sustained move under $3.054. This won’t change the trend to down, but it will likely indicate the market has to spend more time developing its support base.