Natural Gas Price Fundamental Daily Forecast – Supported by Prospect of Hotter Near-Term Temperatures

Natural gas futures are trading higher for a seventh straight session on Wednesday as the prospect of summer-like heat arriving sooner-than-expected is attracting strong speculative buying.

Updated forecasts as of early Wednesday showed only a minor net change in projected gas-weighted degree days, which continued to tract above-normal overall for the 15-day period, according to Bespoke Weather Services.

At 13:13 GMT, July natural gas futures are trading $8.562, up $0.168 or +2.00%. On Tuesday, the United States Natural Gas Fund ETF (UNG) settled at $28.40, up $1.00 or +3.65%.

It’s All About the Weather…

Bespoke Weather Services characterized the weather outlook as bullish, considering “models are growing more adamant about the return of stronger heat as we end the month and head into at least the start of June, wrote Natural Gas Intelligence (NGI). “A “new trough into the West” during this time frame would allow “hotter downstream ridging to develop in the eastern half of the nation again.”

According to NGI, Maxar’s Weather Desk similarly forecast a pattern in the 11-15 day period (May 28-June1) that would result in widespread above-normal temperatures for the Lower 48.

The pattern for late May into early June supports “continued rounds of cool and unsettled conditions in the Northwest,” the forecaster said. “Warmer themes are downstream, with above-normal temperatures being in the Southwest and from the Plains to the East Coast.

“…Since yesterday, the forecast trended warmer in the Rockies and Midwest; although, cooler revisions in Texas are tied to the wetter projections from the favored Euro and Canadian models.”

Bespoke Sees Volatility Due to Weather Demand, Mixed Production

“On the fundamental side, production remains down around 95 Bcf/d in our early cycle data,” while liquefied natural gas export volumes were “rising notably” in the latest estimates, Bespoke said. “…We still expect price action to remain rather jumpy, but this set up still makes us believe that odds favor new highs in prices over the next few weeks.”

Daily Forecast

From a technical perspective, the short-term and long-term chart patterns are bullish.

Short-term, July natural gas is trading on the strong side of its retracement zone at $8.085 to $7.786. Making this area support.

The longer-term support is $6.283 to $5.630. The market was trending into this area last week before buyers stepped in at $6.521.

Fundamentally, the prospect of early heat combined with relatively low production is bullish over the short-term. Storage below the 5-year moving average is long-term bullish.