Natural Gas Price Fundamental Daily Forecast – Volatile Trade Until Funds Start Buying Again

Natural gas futures closed sharply lower on Tuesday, reversing Monday’s gain. The recent volatile price action has been fueled by weather models. There is a longer-term upside bias developing because of lower production and rising exports, but the weather hasn’t been very cooperative for short-term speculators.

July Natural Gas futures settled at $3.331, down $0.093 or -2.72%.

Forecast

The latest weather forecast calls for slightly higher than normal gas demand over the next two weeks, however, Tuesday’s price action suggests this news has already been priced into the market. Furthermore, the March/April rally was supported by aggressive buying by the hedge and commodity funds, however, they have been less aggressive in May after spiking the market into $3.506 over a week ago.

The chart pattern combined with the dropping open interest suggests we may become rangebound until seasonal factors kick-in, or temperatures become unseasonably hot.

The short-term range is $3.506 to $3.256. Its retracement zone is $3.368 to $3.335. If investors remain indecisive like they have been this week then gas is likely to straddle this zone the rest of the week.

A bullish tone could develop on a sustained move over $3.368 and a bearish tone on sustained move under $3.335. A strong rally will target $3.506 to $3.577 over the near-term. A break below support could trigger a labored move into $3.256, $3.229, $3.209 and $3.197. With the levels stacked, I expect to see strong buyers come in on a break into support.

According to the latest report from the U.S. Energy Information Administration, 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 Thursday’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.