Natural Gas Price Fundamental Daily Forecast – Traders Respecting Key Technical Area Despite Bearish Fundamentals

Natural gas futures are trading lower shortly before the regular session opening. The market is currently testing a short-term support area on the daily chart. The early price action suggests that aggressive counter-trend buyers maybe recognizing this area as support. There is also evidence of profit-taking. However, this is just normal price action after a steep sell-off. The fundamentals are bearish at this time and prices are likely to fall further if Thursday’s U.S. Energy Information Administration weekly storage report is bearish.

At 1115 GMT, October Natural Gas futures are trading $2.864, down $0.005 or -0.17%.

Later today, the September futures contract will expire so watch for increased volatility.

Weather

The current weather forecasts are calling for warmer-than-average temperatures in the Northeast over the next two weeks, but this doesn’t appear to be enough to attract enough buyers to turn prices higher. Temperatures may retreat a little today, but could remain above average. Additionally, above-normal temperatures are also expected across the rest of the country over the same time period.

Supply

According to the latest figures from Platts, “U.S. dry gas production stood at 82 Bcf/d Tuesday, a drop of 800 MMcf on day. Production is estimated to average 82.2 Bcf/d over the next two weeks. In August thus far, output averaged 81.8 Bcf/d, up 9.4 Bcf from 72.4 Bcf/d last year.

Demand

S&P Global Platts estimates, “Total U.S. demand is set to climb to 82.1 Bcf Tuesday, up 1.2 Bcf on day, largely due to above-average temperatures in the Northeast. Demand is projected to average 79.4 Bcf/d over the next seven days. Demand averaged 77 Bcf/d in the past week.

Forecast

Technically, October Natural Gas futures are testing a short-term support area at $2.865 to $2.833. The short-covering could strengthen if buyers can overtake $2.865. Look for further weakness if sellers drive this market through $2.833.

Fundamentally, the market will remain weak as long as production continues to offset demand. Despite a potential technical “blip”, this is expected to chip away at the mounting storage deficit, giving the market a solid downside bias.

Finally, early guesses for Thursday’s EIA storage report show a build in the low 60s to low 70s range. This is based on increased production, looser power burns and much milder weather.