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Natural Gas Price Fundamental Daily Forecast – Traders Focused on EIA Storage Report

By:
James Hyerczyk
Updated: Aug 29, 2019, 12:24 UTC

The hurricane is a non-issue for traders on Thursday. The storm isn’t even expected to reach South East Florida until the week-end, which puts it hundreds of miles from the nearest oil or natural gas platform near Louisiana and Texas.

Natural Gas

Natural gas futures are inching higher early Thursday but remain inside yesterday’s wide range. That spike in prices was not fueled by a hurricane scare, but rather by net short speculators covering positions as the September Nymex futures contract rolled off the board. Stronger spot prices across the United States also helped support the market.

At 11:44 GMT, October natural gas futures are trading $2.233, up $0.011 or +0.50%.

Volatile trading is rather common during rollover week and yesterday’s session was no exception. The move was mostly technical in nature as the weather forecasts remained relatively unchanged for the next several days. Generally showing moderate national demand through the first third of September.

Lower production may have also supported the rally with reports showing a drop of 1.2 Bcfd, according to Bespoke Weather Services.

Early Thursday, traders are keeping their powder dry ahead of the release of the government storage report later today.

U.S. Energy Administration Weekly Storage Report

Today’s EIA report, due to be released at 14:30 GMT, could give bulls fresh life if it comes in under the forecast, but prices could tumble on a big miss.

Natural Gas Intelligence (NGI) says, “A Bloomberg survey of 13 analysts called for an injection between 45 Bcf to 61 Bcf, with a median of 56 Bcf. Intercontinental Exchange settled at a 60 Bcf injection, while NGI projected a 51 Bcf build.”

Our estimate calls for a 55 Bcf injection.

Short-term Weather Outlook

According to NatGasWeather for August 29 to September 5, “Comfortable conditions will continue across the Midwest, Northeast and Mid-Atlantic regions due to weather system with showers and cooling for light demand. The West into Texas will be hot with highs of 90s and 100s as high pressure rules for strong regional demand.”

“Tropical storm Dorian will bring rains to Florida and portions of the Southeast Sunday through Tuesday, while high pressure will expand across much of the country Tuesday through Wednesday for a minor bump in national demand, although cooling off again late in the week.”

“Overall, national demand will be moderate to low across the central and northern US but high over the West into Texas.”

U.S. EIA Infrastructure and Hurricane Dorian Map
U.S. EIA Infrastructure and Hurricane Dorian Map

Hurricane Update

According to the experts at NatGasWeather, “Two tropical systems, but the only one of primary concern is Dorian tracking through the Caribbean and towards Florida. The latest track was a touch further, which means less opportunity to impact much of the Gulf of Mexico. We expect bearish impacts through cooling and showers for lost demand but could also be slightly lighter production and LNG export issues. The second storm, Erin, is expected to remain off the US Coast.”

“The latest guidance was a little stronger and increases the cyclone to hurricane strength prior to impacting Florida and the Southeast U.S. Atlantic Coast Sunday-Monday,” NatGasWeather said. “But again, impacts are likely to be more bearish than bullish” due to the projected loss of demand from cloud coverage weighing more heavily than any loss of production.”

Natural Gas
Daily October Natural Gas

Daily Forecast

The hurricane is a non-issue for traders on Thursday. The storm isn’t even expected to reach South East Florida until the week-end, which puts it hundreds of miles from the nearest oil or natural gas platform near Louisiana and Texas.

It will become less of an issue if it moves north, up the coast of Florida and stays in the Atlantic Ocean. If it crosses Florida, it is likely weaken but could pick up speed again if it happens to stay intact and reaches the Gulf of Mexico. However, professionals aren’t taking hurricane insurance at this time.

Some may actually be looking at the short side since the power is likely to go out in Florida, and there will be less-demand for cooling. It could actually turn into a bearish event.

We’ll consider talking about the bullish side if it reaches the Gulf of Mexico.

In the meantime, traders should focus on the EIA report since this is likely to control the price action today. Also, given the large speculator net short positioning, many traders may simply roll forward September contract shorts to the October contract, weighing down prices,” EBW said.

As far as the chart is concerns, the key level to watch today is $2.226.

Look for an upside bias on a sustained move over $2.226. Buyers may be looking to take out stops over $2.273 to $2.278 in an effort to trigger an acceleration into $2.332 to $2.338.

A sustained move under $2.226 should generate downward pressure, but the selling could be labored because of potential support at $2.191, $2.159 and $2.132.

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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