Natural Gas Price Fundamental Daily Forecast – Time May Be Running Out for Bullish Traders

Natural gas futures are trading nearly flat to higher early Tuesday. Yesterday, the market broke sharply early in the session, but buyers came in at $2.896 as the market neared last week’s low at $2.891, the June 8 bottom at $2.883 and the major technical retracement zone at $2.885 to $2.848.

At 0647 GMT, August Natural Gas futures are trading $2.928, up 0.007 or +0.24%.

The price action suggests that natural gas bulls are holding out hope for the return of hot weather. Well, because they are going to need it in order to generate any upside momentum in the face of near-record production.

According to NatGasWeather.com for the period June 26 to July 2, “Several weather systems will impact the northern U.S. the next few days with showers and thunderstorms but also with minor cooling and mostly comfortable where highs will reach the 70s to lower 80s. It will become hot across the Midwest and Northeast late in the week as high pressure strengthens. The southern U.S. will be hot with 90s and 100s, while the West hot to start but cooling late in the week as a weather system arrives. Overall demand will be high.”

The Global Forecasting System weather model was a little cooler overall, although it continued to show quite hot across most of the country for the next two weeks due to strong and widespread upper high pressure dominating, according to NatGasWeather.com.

The hottest period continues to be focused around June 29 to July 4 as the core of the heat dome sets up over the eastern half of the country, resulting in widespread high temperatures in the 90s to 100s, including from Chicago to New York City.

Forecast

This week’s U.S. Energy Information Administration’s weekly storage report is expected to come in between the upper 60s to mid-70s Bcf, which is near the five-year average of 72 Bcf injection. However, keep in mind that the last two reports missed solidly to the bearish side.

With storage levels still well below average, and tightening trend in EIA data would be bullish if accompanied by hot weather forecasts.

I think this market has about 1 to 2 more weeks before bearish seasonal patterns will take over. Without lingering heat, rising production could kill any chances for a summer rally.

The key support area remains the 50% level at $2.885 to the 61.8% level at $2.848.

Holding above $2.885 will indicate that aggressive speculators are still coming in to support the market while waiting for the weather market to continue.

Trading below $2.885 will indicate the buying is getting weaker and the selling is getting stronger. Taking out $2.848 will severely diminish the markets chances of a bull market.