Natural Gas Price Fundamental Daily Forecast – Upside Bias Supported by Bullish Weather Pattern

Natural gas futures gapped open on Monday and extended those gains throughout the day to finish higher for the session. The move was fueled by short-covering and profit-taking as investors reacted to updated weather forecasts calling for increased summer demand over the near-term.

A successful recovery from last week’s test of three month lows also encouraged aggressive counter-trend buying that helped feed the rally throughout the session.

August natural gas futures finished the session at $3.049, up 0.098 or +3.32%.

Forecast

Given the upside momentum into the close, expectations are for a follow-through rally on Tuesday. A successful close over a key technical area at $2.988 to $3.915 also suggests a strong upside bias is building. This area is now support so in order to sustain the rally, buyers must continue to defend this area or the market will collapse towards last week’s low at $2.875.

On the upside, the first target is the main top at $3.102. Taking out this top will change the main trend to up and likely extend the rally into the next main top at $3.127. The main range is $3.462 to $2.875. If the strong buying continues then its 50% level at $3.234 becomes the primary upside target.

The catalyst behind the rally is a change in the weather forecasting models. Temperatures are now expected to return to the upper 80s to 90s late in the week in key demand areas in the southern and eastern United States.

Furthermore, the longer-term models are now indicating that the western, central and southern U.S. will experience the return of warm to hot temperatures through July 9.

Last Thursday’s U.S. Energy Information Administration’s weekly report for the week-ended June 16 showed that total natural gas in storage currently stands at 2.770 trillion cubic feet. This is 10.4% lower than levels at this time a year ago but 7.4% above the five-year average for this time of year.

This week’s report for the week-ended June 23 is expected to show a build of about 56 billion cubic feet. This compares with a gain of 61 billion cubic feet in the preceding week, an increase of 37 billion a year earlier and a five-year average rise of 72 billion cubic feet.

The current rally is as good as the weather forecast so continue to look for strength as long as the move remains underpinned by the return of warm to hot temperatures.