Natural Gas Price Fundamental Daily Forecast – Traders May Start Pricing in Predictions of Heat for After June 18

Natural gas prices are inching lower on Monday shortly before the regular session opening. Volume is extremely low and the range is tight. The market is trading inside Friday’s range which suggest investor indecision and impending volatility. Traders appear to be waiting for new weather forecasts after the completion of an uneventful weekend.

At 09:39 GMT, July natural gas futures are trading $2.331, down $0.006 or -0.26%.

Late Friday, NatGasWeather made a few tweaks to its mid-term outlook. “The overnight weather data was little changed through next week, although most datasets were a little hotter around June 17-21^st. It’s important to note the GFS remains hotter than the European model after June 15^th, with differences in need of resolving, which likely won’t occur until the weekend break.”

“We see the risk being towards the weather data adding demand through hotter trends over the weekend, especially after June 18^th, although likely still not enough to trend solid bearish weather sentiment bullish. Until the weather data shows more ominous heat gaining ground across the southern and eastern US, larger than normal builds should be expected to continue.”

U.S. Energy Information Administration Weekly Storage Report

Last week, the EIA reported another huge 119 Bcf build into inventories for the week-ending May 31. The reporting period included the Memorial Day holiday, which analysts blamed as the primary reason for the large miss.

The number was well above last year’s 93 Bcf injection and the five-year 102 Bcf average build.

Short-Term Weather Outlook

According to NatGasWeather for June 10 to June 16, “A large weather system and associated cool front will sweep across the northern and central US over the next several days with highs of 60s to 70s. This system will also cool Texas, the South, and Southeast into the comfortable 80s, then warming back into the upper 80s to lower 90s late week into next weekend. Strong high pressure will warm the West Coast and Southwest into the upper 80s to 100s for strong demand. Overall, demand will be low.

Daily Forecast

Basically, the introduction of hotter temperatures may slow down the selling, but if it does lead to a short-covering rally, then these gains are likely to be limited due to large storage builds.

The short-term forecast predicts low demand, but hotter temperatures are forecast for later in the month so this week’s price action may start to reflect these concerns. Therefore, the selling pressure may not be as intense as we’ve seen the past two weeks. Remember that professional traders tend to look at forecasts 10 to 21 days into the future.

Watch the language used in the weather reports. Don’t expect a prolonged rally until forecasters start using terms like “heat dome”.