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Natural Gas Price Fundamental Daily Forecast – Traders are Pricing in Cooler Temperatures from June 25 to July 1

By:
James Hyerczyk
Published: Jun 19, 2018, 05:17 UTC

The next major move is likely to be determined by the new forecast for the first week in July. This forecast will determine whether August natural gas holds $2.885 to $2.848, or breaks through it.

Natural Gas

Natural gas prices plunged on Monday after a trend towards cooler temperatures showed up in the weather forecasts. Hedgers also came in heavy after the market tested a multi-month high, killing the upside momentum and putting the market back inside its long-term trading range.

Spot prices remained firm, mostly because of the hot temperatures blanketing several key demand areas. However, this may last only a couple more days.

Sellers are continuing to pressure the market early Tuesday, however, no significant bottoms have been taken out. At 0445 GMT, August Natural gas is trading $2.944, down $0.007 or -0.24%.

Monday’s technical reversal top is a potentially bearish chart pattern. Today’s early follow-through to the downside confirms the shift in momentum to down. The trend will change if $2.909 is violated. This could lead to an eventual test of a major 50% to 61.8% retracement zone at $2.885 to $2.848.

The price action also indicates that hedgers are going to vigorously defend the $3.040 to $3.050.

The weather outlook calls for hot temperatures to remain in place through the weekend then turn slightly cooler for June 25-July 1, this according to NatGasWeather.com.

NatGasWeather.com is also saying, “All the weather models continue to show the hot upper ridge strengthening and expanding, just a touch less impressive with it this round.”

The weather service is also saying that it expects the hot ridge to dominate most of the country through the first week of July, and likely through the second week, for periods of strong national demand. “We expect this should be quite telling to how record production will impact build sizes compared to last year during heatwaves,” NatGasWeather.com said.

To recap the report from NatGasWeather.com for the period June 18 to June 24, “Hot conditions with highs of 90s will cover the southern and eastern U.S. to open the week, including Chicago to NYC for strong demand. Late in the week, hot conditions will cover the Southeast with 90s and 100s for regionally strong demand. Next weekend will be hot over the southern US with 90s, while warm over the North with 70s and 80s. Demand will be high early in the week, then gradually easing to moderate for the rest of the week.”

We’re in a weather market so the swings in the market are likely to follow the changes in the forecast. The hot conditions this week and early next week drove the August futures contract to $3.043. However, the forecast for an easing of temperatures into July 1, drove prices lower on Monday. Therefore, it’s safe to say that the weather forecast until July 1 has been, or is being priced into the market.

The next major move is likely to be determined by the new forecast for the first week in July. This forecast will determine whether August natural gas holds $2.885 to $2.848, or breaks through it.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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