Natural Gas Price Fundamental Daily Forecast – Trend Changed to Down with $3.691 to $3.568 Next Support Target

Natural gas futures closed lower on Tuesday, reversing the previous session’s gains as updated forecasts showed cooler temperatures into the end of August. The selling started early with the market opening lower and continuing throughout the session into the close.

At 21:00 GMT, October natural gas futures are trading $3.847, down 0.113 or -2.85%.

Weather was the catalyst on Monday and is expected to continue to drive the price action ahead of Thursday’s government storage report.

NatGasWeather Sees Summer Heat Dissipating

The American Global Forecast System (GFS) gave back cooling degree day (CDD) gains from Monday in its overnight run, according to NatGasWeather. The cooling trends were focused on next week and for late this month in the “important” August 27-31 timeframe, the firm said and Natural Gas Intelligence (NGI) reported.

“Where the overnight data remained hot enough is this weekend and next week as a very warm to hot ridge rules the eastern half of the U.S., while also very warm to hot across the southern U.S. for a return to strong national demand, although not nearly as hot and impressive as last week,” NatGasWeather said.

National gas demand is expected to fade for the August 27-31 period, according to the firm.

“In fact, this August 27-31 period is likely to lead to the lightest national demand of the past few months, highlighting that extreme summer heat is almost out of time,” NatGasWeather said.

Bespoke Weather Services Sees Supportive Weather Conditions

Bespoke Weather Services made no changes to its 15-day forecast day/day. The return to near-normal temperatures predicted for the end of the month could prove temporary, the firm said an NGI reported.

“All in all, we remain in a pattern biased to the above side of normal, but there is a decline back to around normal as we reach the end of the month,” Bespoke said. “This cooling may well be temporary, given the atmosphere’s entrenchment into a La Nina state.”

In terms of various fundamental data points, power burns as of early Tuesday “are the weakest we have seen in a while,” an unexpected development that bears monitoring, according to the firm.

“This is likely the main catalyst in selling back off this morning, indicating that there is more coal in the stack, taking some share away from natural gas,” Bespoke said. “We still see the big picture as supportive, but in the near-term would not be surprised to see another test of low $3.80s support.

Short-Term Outlook

We tend to agree with Bespoke’s outlook. Although we’ve seen the weaker shorts liquidating positions since August 5, our work suggests that bullish traders are looking for value after buying nearly every dip throughout the summer.

We’re looking for a pullback into $3.691 to $3.568. Since this zone represents value, we expect buyers to step in on a test of this area. This may not lead to a retest of $4.211, but it could trigger a late month rally into $3.951 to $3.890.