Natural Gas Price Fundamental Daily Forecast – Up on Eclipse Demand Surge?

Natural gas futures rallied on Monday to a one-month high. The market jumped over 2-percent on short-covering in reaction to a rise in exports.

October Natural Gas futures settled at $2.992, up $0.062 or +2.12%.

Traders concluded the rally was fueled by short-covering because there was not much change to the weather forecasts over the week-end. Additionally, there is actually talk circulating calling for the start of a cooling cycle. Both factors should’ve pressured prices.

According to Thomson Reuters, U.S. exports were expected to average 8.8 billion cubic feet per day (bcfd) this week, up 33 percent from the corresponding week last year.

Natural gas prices were also supported by expectations of an increase in demand for the fuel for power generation because of the total solar eclipse on Monday.

Forecast

Last week finished with natural gas futures caught between a pair of retracement zones. Monday’s close was above these zones, suggesting the presence of buyers and giving the market an upside bias. If the upside momentum continues to rise then look for bullish traders to attempt a breakout over the last main top at $3.042. If the buying is strong enough then the rally could extend into a major retracement zone at $3.129, $3.131 and $3.142.

The only problem with this technical forecast is I can’t find a fundamental reason for it. So I’m going to have to assume it may be fueled by aggressive speculative buying.

The new weather forecast is not very supportive for an extended rally. According to a U.S. weather model, while temperatures are likely to be near-normal until early September, they were seen lower than the hotter weather anticipated last week.

Looking ahead to Thursday’s U.S. Energy Information Administration’s weekly storage report, early estimates show utilities likely injected 40 billion cubic feet of gas into storage during the week-ended August 18.

In other news, the U.S. Commodity Futures Trading Commission announced last Friday that U.S. natural gas speculators boosted their net long positions for the first time in four weeks in the week to August 15, betting prices will rise on the chance there will be less gas than usual in storage this winter.

If the upside momentum continues then look for buyers to go after $3.042. This is the trigger point for a possible acceleration into $3.129 to $3.142.

If the selling fades then look for the market stair step down into $2.982 and $2.964. The market then opens up to the downside with the next targets $2.921 to $2.892. The rally will fall apart if $2.886 fails.