Natural Gas Price Fundamental Daily Forecast – Supported by Renewed Weather-Driven Demand in August

Natural gas futures are trading flat shortly before the release of the latest weekly government storage figures at 14:30 GMT. Ahead of the report, the market is being supported by expectations of strong weather-driven demand and steady export activity. This, despite a steep sell-off at the start of the week due to profit-taking, volatility associated with the expiration of the August futures contract and a slight shift toward lower cooling demand.

At 11:08 GMT, September natural gas futures are trading $3.967, unchanged.

Short-Term Weather Forecast

NatGasWeather said that heat is still expected to taper some in coming days. “National demand will be much lighter this weekend and next week as a series of weather systems over Canada advance aggressively across the eastern half of the U.S. with comfortable highs of 70s to mid-80s,” the firm noted.

However, the forecaster also said Wednesday, protections show heat intensifying August 6-11 as most of the Lower 48 “warms back above normal with highs of mid-80s to 100s for a return to strong national demand, Natural Gas Intelligence (NGI) reported.

Liquefied Natural Gas Exports Hovering Near All-Time Highs

NGI also reported that LNG export levels are holding strong this week just shy of 11 Bcf/d – a level near all-time highs. LNG exports to fuel cooling needs in Asia and Europe are soaking up supply and feeding imbalance worries. Estimates this week showed production around 91 Bcf, below recent highs and well below levels prior to the pandemic. The divergence between demand and output has provided price support for futures.

Weekly US Energy Information Administration Storage Report

NGI wrote that this week’s EIA storage report, covering the week-ending July 23, is expected to show an injection into storage in the low 40s Bcf.

NGI also reported a Reuters poll found projections ranging from a build of 33 Bcf to 52 Bcf, with a median injection of 42 Bcf. Results of a Bloomberg survey showed estimates spanning 34 Bcf to 49 Bcf, with a median of 41 Bcf and a Wall Street Journal survey produced estimates from 39 Bcf to 47 Bcf with an average of 43 Bcf. NGI model is predicting a 49 Bcf injection.

Daily Forecast

Ahead of the EIA report, the deficits, combined with ongoing demand, are fueling the imbalance concerns.

“The big picture still looks bullish” for futures “and could be aided by any hotter weather shift,” Bespoke Weather Services said. “We say it over and over again, but until production can get to 2021 highs, it is difficult to see enough loosening in supply/demand balances to make the market more comfortable with the storage situation.”

Technically, the main trend is up, but momentum has been trending lower since Monday. A trade through $4.165 will signal a resumption of the uptrend. The main trend will change to down on a move through $3.154. This is highly unlikely however.

The minor trend is down. This is controlling the momentum. A trade through $3.837 will indicate the selling pressure is getting stronger.

The nearest support zone is $3.869 to $3.799. This zone stopped the selling on Wednesday at $3.837.

On the upside, the resistance comes in at $4.001 to $4.040. Trader reaction to this zone could determine the direction of the market on Thursday. Look for a strong tone to develop on a sustained move over $4.040, and this week’s weak tone to continue on a sustained move under $4.001.