Natural Gas Price Fundamental Daily Forecast – Traders Already Pricing Hotter Pattern for Early June

Natural gas futures are edging higher late in the session on Tuesday amid a preliminary drop in daily output and forecasts for warmer weather and more cooling demand over the next two weeks than previously expected.

Also underpinning prices, power demand in Texas was expected to hit a monthly record on Tuesday as homes and businesses crank up their air conditioners to escape another spring heat wave.

At 17:52 GMT, July natural gas futures are trading $8.359, up $0.306 or +3.80%. The United States Natural Gas Fund is at $28.35, up $0.95 or +3.47%.

NatGasWeather Outlook

According to NatGasWeather for Tuesday, “The overnight GFS data was 0 TDDs changed, while the EC gained 1-2 TDDs. Most importantly, coming U.S. weather patterns will continue to drive enough of a mix of heating and cooling demand the next 15-days to keep current deficits just over -300 Bcf.”

“As far as details, Texas and surrounding states will remain hotter than normal the next several days with highs holding in the 90s to lower 100s for strong early season cooling demand, aided by highs near 90 degrees Fahrenheit up the East Coast late in the week.”

“However, the overnight data held cooler trends this weekend into early next week as weather systems sweep across the interior U.S., including cooling Texas from near 100 Fahrenheit into the more comfortable 70s and 80s.”

Daily Output and Demand Numbers

Data provider Refinitiv said average gas output in the U.S. Lower 48 states climbed to 94.8 billion cubic feet per day (bcfd) so far in May from 94.5 bcfd in April. That compares with a monthly record of 96.1 bcfd in November 2021.

On a daily basis, however, output was on track to drop 1.9 bcfd to a near three-week preliminary low of 93.5 bcfd on Tuesday due mostly to declines in Pennsylvania. If that drop stands, it would be the biggest one-day decline since freeze-offs shut wells in early February, Reuters reported.

Short-Term Outlook

Technically speaking, the July natural gas futures contract are trading on the strong side of a short-term retracement zone at $8.085 to $7.786, making it support. A sustained move over this area puts the market in a position to retest the recent top at $9.052.

A trade on the weak side of $8.085 to $7.786 could trigger the start of a steep correction with $7.489 the first downside target.

Fundamentally, the market remains strong, driven by worries that a hotter-than-normal summer will arrive early and increase deficits further.