Natural Gas Price Fundamental Daily Forecast – Two Different Weather Models Causing Choppy Trade

Natural gas futures eased lower on Wednesday on forecasts for more mild temperatures next week that is expected to reduce heating demand and power generators’ use of the fuel.

July natural gas futures settled at $3.300, down $0.012 or -0.36%.

Additionally, investors also sold natural gas in reaction to an expected drop in gas usage over the long U.S. Memorial Day weekend of May 27-29.

The volatile price action this week may have been caused by two notably different weather forecasts for early June. The EC weather model has been to the cooler/bearish side, while the rest of the data has been to the warm/hot side and toward bullish.

The data trended hotter on Monday, and likely aided the rally, but then trended cooler Tuesday, with prices selling back off. On Wednesday, the data was mixed which may have been the reason for the choppy trade.

Forecast

Prices continued to straddle the short-term retracement zone at $3.368 to $3.335 on Wednesday, but the close under this zone could give the market an early downside bias on Thursday.

A sustained move under $3.335 will indicate the presence of sellers. If the selling pressure continues to grow then we could see traders attack a series of bottoms at $3.256, $3.229 and $3.209. Bullish traders may actually be trying to shake out the weaker longs. We’ll know this if buyers come in on a test of the major support zone at $3.197 to $3.124.

Overtaking $3.368 will signal the return of buyers. This could create enough upside momentum to challenge a pair of tops at $3.428 and $3.506.

According to the latest report from the U.S. Energy Information Administration (EIA), total natural gas in storage stands at 2.369 trillion cubic feet. This is 13.6% lower than levels at this time a year ago but 10.8% above the five-year average for this time of year.

Looking ahead to today’s EIA report, weekly storage is expected to show a build of about 64 billion cubic feet in the week-ended May 19. Last week, the report showed a build of 68 Bcf, an increase of 71 Bcf a year ago and a five-year average rise of 90 Bcf.