Natural Gas Price Fundamental Daily Forecast – Upside Momentum Building Over $3.080

Natural gas is trading higher early Monday after Friday’s lower close. The market jumped higher on the opening and is now threatening to take out Friday’s high. The price action is currently being driven by the weather. Late summer heat is helping to drive up demand for electricity to run air conditioners, leading to firm demand for natural gas.

The change in temperatures seems to have caught short-sellers by surprise since they were preparing for the start of fall in the U.S. and the return of mild temperatures. Autumn begins on September 22.

To recap last week’s fundamentals, the EIA said in its weekly report that natural gas in storage rose by 91 billion cubic feet in the week-ended September 8. This was well above the estimate of 85 billion cubic feet.

The 91 bcf increase compares with a build of 65 bcf in the preceding week and represented a decline of 179 billion from a year earlier. However, it was 43 bcf above the five-year average.

According to the EIA, total natural gas storage stood at 3.311 trillion cubic feet, 5.1% lower than levels at this time a year ago and 1.3% above the five-year average for this time of year.

According to natgasweather.com, “Warmer temperatures will spread east this weekend and last through next week with widespread 80s and 90s for a return to stronger than normal national demand.

“Overall, national natural gas demand will be moderate to low, increasing to moderate to high.”

Forecast

It’s hard to predict direction based on the storage numbers alone. I suspect the supply numbers are still skewed in Texas and I know that the demand numbers are off in Florida because there are still several thousand investors without electricity.

The technical picture looks promising for bullish traders. The market was capped at $3.200 on June 29 and supported at $2.886 on August 1. The mid-point of this range is $3.043. Currently, the market is trading above this mid-point, helping to give it an upside bias. Additional support is $3.080.

On the upside, once buyers clear last week’s high at $3.159, the momentum should take prices to $3.198 to $3.200.

The charts also indicate nat gas could run into a wall of resistance at $3.224 to $3.303, but not until after the market takes out a slew of weak shorts.

Without knowing the true catalyst behind the price action at this time, I’m going to have to settle on saying, look for an upside bias as long as $3.080 to $3.043 holds as support. Look for sellers to start coming back in anywhere from $3.198 to $3.303.