Natural Gas Price Fundamental Daily Forecast – Testing Short-Term Retracement Zone at $2.842 to $2.863

Natural gas futures are posting a two-sided trade early Wednesday. The market poked through a long-term 50% level on the chart, but the buying dried up when buyers reached a short-term retracement zone. All of this price action is normal technically related position-squaring. Yesterday, we saw prices jump $0.024 or +0.85% despite declining demand at the end of summer.

At 1106 GMT, October Natural Gas futures are trading $2.846, up $0.018 or +0.64%.

Demand Situation

According to S&P Global Platts Analytics estimates, “Total Demand declined by 700 MMcf on day and stands at 76 Bcf/d Tuesday.” However, “Demand is expected to climb and average 77.4 Bcf/d over the next seven days, with the National Weather Service calling for the likelihood of warmer-than-average temperatures across much of the country over the next eight to 14 days.”

Platts Analytics also said, “Month-to-date, demand averaged 77.6 Bcf/d, up 9.1 Bcf from year ago levels of 68.5 Bcf/d.”

Additionally, the “Power burn is estimated to jump 1.1 Bcf Tuesday and stand at 32 Bcf, largely due to increases in cooling demand in the Northeast, as temperatures soar above seasonal norms. Over the next seven days, power burn demand is projected to average 34 Bcf/d, largely in line with demand seen over the past week.”

Production

A Platts report also said, “U.S. dry production is set up to drop to 82.2 Bcf Tuesday, down 1.5 Bcf from the day prior. Much of the decline came from the Northeast, Texas, Rockies, Southeast and the Midcontinent production areas. Despite these declines, output in September thus far continues to remain 10 Bcf higher at 83 Bcf/d, compared to the year-ago levels.”

Weather

Traders are monitoring the progress of Hurricane Florence. From the radar, it looks like it is going to be a massive storm with great destructive force. Based on its current path, it is expected to impact the Carolina’s and Mid-Atlantic region from Thursday into early next week. Demand in these areas should plummet.

U.S. Energy Information Administration Report

Thursday’s EIA government report is expected to show a build of 65 Bcf, up slightly from last week’s 63 Bcf build. This means that the supply deficit will continue to widen.

Forecast

The main range is $2.688 to $2.979. Its retracement zone is $2.833 to $2.752. This zone is controlling the longer-term direction of the market. Trading on the strong side of $2.833 will give the market an upside bias. A sustained move under $2.799 will give the market a downside bias.

The short-term range is $2.931 to $2.752. Its retracement zone at $2.842 to $2.863 is the next upside target.

Based on the early price action, we could see a strong rally if the buying volume increases on a move over $2.863.