Natural Gas Price Fundamental Daily Forecast – Traders Pricing in 70 Bcf Injection

Natural gas prices are trading slightly lower early Thursday as investors await the release of today’s U.S. Energy Information Administration’s weekly storage report. This report is very important because as we move through the cooling season, investors are going to start putting more emphasis on rising production than the weather.

At 0750 GMT, August Natural Gas is trading $2.967, down $0.014 or -0.47%.

Don’t get me wrong, traders will still respond to the weather forecasts, but forecasts for above average temperatures will just not cut it for the bulls moving forward. Investors are going to want to see reports of prolonged periods of hot temperatures in key demand areas, or they will lose interest in the long side of the market.

Essentially, bullish traders are hoping for periods of prolonged heat that can provoke enough cooling demand to put a dent in rising production and growing supply.

Forecast

This week’s EIA storage report is expected to show an injection of 70 Bcf, in line with the 5-year average. After two consecutive bearish storage reports, this one may be the one that finally drives out the lingering long speculators.

Reuters is saying storage could increase by a very tight 64 to 76 Bcf with a 71 Bcf consensus.

Additionally, on Friday, the EIA will release its monthly production report. If it shows rapidly growing production then look out to the downside.

As far as the weather is concerned, NatGasWeather.com is saying its Global Forecasting System forecasting model is predicting temperatures a little hotter for July 9-11. Overall, a bullish pattern is expected beginning late next this week into mid-July as most of the country is forecast to see temperatures warm to above-normal levels.

Besides the weather, investors are watching the rise in production. According to Genscape, Inc., on Monday, production volume was more than 1 Bcf/d higher than last week’s volumes and are hovering near record levels.

Based on this figure, the Mobius Risk Group is saying that an additional 1 Bcf/d of production growth from this point through the end of the storage injection season would still leave end-of-injection season storage levels at less than 3,600 Bcf, assuming flat year-on-year demand and normal temperatures.

Prices should rise today if the EIA report comes in well-below the 70 Bcf consensus. However, don’t expect a sustainable surge through last week’s high at $3.043 unless the number is accompanied by bullish weather forecasts.

The last two EIA reports have been bearish, however, prices remained stable. The third time could be the charm for bearish investors.

The inability to overcome $2.985 will be the first sign of weakness. A move under $2.967 will be the next. This may even be the trigger point for a steep break into $2.885.