Natural Gas Price Fundamental Daily Forecast – Surprise Price Surge May Be Related to Oil Rally

Natural Gas futures spiked to a two-week high on Thursday before backing off into the close. The market inexplicably rallied enough to take out the recent top at $3.152 after the U.S. Energy Information Administration’s weekly inventories report came in higher than the forecast.

November Natural Gas futures settled at $3.127, up $0.009 or +0.29%.

The EIA said in its weekly report that natural gas in storage rose by 91 billion cubic feet in the week-ended September 8. This was well above the estimate of 85 billion cubic feet.

The 91 bcf increase compares with a build of 65 bcf in the preceding week and represented a decline of 179 billion from a year earlier. However, it was 43 bcf above the five-year average.

According to the EIA, total natural gas storage stood at 3.311 trillion cubic feet, 5.1% lower than levels at this time a year ago and 1.3% above the five-year average for this time of year.

I can’t say with any confidence that I know why nat gas rallied on Thursday. The storage number came in well above the numbers I had been working with all week. From personal experience, I know that Florida Power & Light is working around the clock to restore electrical power to Floridians. Although I have power (I live in Fort Myers, just north of the hard-hit Naples area), much of the state does not. FP&L sent out a text message saying that all power will be restored by September 22.

I’m going to chalk up the move to price action. Perhaps it was hedge fund buyers expressing their glee with the rally in crude oil. I am pretty sure they tried to run stops above $3.152. There are even bigger buy stops over $3.200.

Forecast

I’m not going to try to predict the price action because I don’t know what the funds have up their sleeves. Momentum traders should continue to play the long side until a big seller comes in strong enough to stop the rally and trigger a reversal to the downside.

Seasonal traders have to be patient. I think this market will be coming down once the cooler weather begins to arrive. Autumn officially begins on September 22.

According to natgasweather.com, “Warmer temperatures will spread east this weekend and last through next week with widespread 80s and 90s for a return to stronger than normal national demand. Cooler exceptions will be across the West and far North.”

“Overall, national natural gas demand will be moderate to low, increasing to moderate to high.”

I think the tone of the market today will be determined by trader reaction to yesterday’s high at $3.159.

On the downside, the first major support is $3.080, followed by $3.043.