Natural Gas Price Fundamental Daily Forecast – Test of $3.691-$3.568 May Attract Last Wave of Summer Buyers

Natural gas futures are edging higher early Wednesday in a limited trade as investors digest the latest weather outlooks calling for lower temperatures into the end of the month.

The trend turned down on the daily chart the previous session when sellers took out the July 28 bottom at $3.840, but so far the move into $3.817 suggests traders were just fishing for sell-stops. If they can drive the market through this new low for the month then look for a move into our primary objective at $3.691 to $3.568.

At 11:47 GMT, October natural gas futures are trading $3.860, up $0.009 or +0.23%.

Week Power Burns, Low Cash Prices Weighing on Futures

Weak power burns and low cash prices are being called the catalysts behind this week’s wave of selling. According to NatGasWeather, its American Global Forecast System (GFS) gave back cooling degree day (CDD) gains from Monday in yesterday’s session. Traders are currently focused on next week’s cooler trends and on the “important” August 27-31 timeframe.

“In fact, this August 27-31 period is likely to lead to the lightest national demand of the past few months, highlighting that extreme summer heat is almost out of time,” NatGasWeather sail.

Natural Gas Intelligence (NGI) reported that spot gas prices continued to fall amid mostly comfortable temperatures in the eastern half of the country. NGI’s Spot Gas National Average slid 13.5 cents to $3.815.

Bespoke Forecasts Biased to Warm Side but Hope for Hotter Temps is Fading

NGI reported that Bespoke Weather Services latest models cooled a bit but remained in a pattern biased to the warmer side of normal. By the end of the month, though, a near-normal outlook is seen for the Lower 48.

The forecaster noted that September may be tough to run hotter than normal considering how many hot Septembers have materialized in recent years. It sees the best chance of heat versus normal over the next 10 days mostly in the eastern half of the nation. The warmth would then relocate to the western states in the 11- to 15-day period, NGI reported.

Daily Forecast

The current price action suggests traders have abandoned their “buy the dip” mentality that proved to be highly successful throughout the Summer, and may now be looking for a value zone that could launch one more late summer rally. We believe the new buyers will come in on a test of $3.691 to $3.568.

We’re looking for this area to attract enough buyers to fuel a rally, but we don’t expect the move to be strong enough to take out the recent high at $4.211. Instead, we expect new short-sellers to come in on any move back above $4.000.

The current break is likely being fueled by long liquidation. The next sell-off is likely to be triggered by new short-sellers.