Natural Gas Price Fundamental Daily Forecast – Weakens Under $2.203, Strengthens Over $2.227

Natural gas futures are trading lower on Friday after posting a steep reversal to the downside the previous session. Not only did the market close lower, but it also erased an earlier rally that took the market to its highest level since July 16. If the downside momentum continues today then sellers may take a shot at the contract low at $2.101.

At 11:35 GMT, September natural gas futures are trading $2.163, down $0.039 or -1.77%.

This week’s early rally was killed and prices retreated on Thursday after a government report showed a weekly injection into U.S. natural gas stocks on the high side of the estimates.

U.S. Energy Information Administration Weekly Storage Report

The EIA reported Thursday that domestic supplies of natural gas rose by 65 billion cubic feet for the week-ended July 26. The average forecast of analysts had called for an increase of 52 billion cubic feet.

Energy Aspects called for a 55 Bcf injection. Intercontinental Exchange EIA Financial Weekly Index futures settled Tuesday at 60 Bcf.

Last year the EIA recorded a 31 Bcf injection for the period, and the five-year average build is 37 Bcf.

Total stocks now stand at 2.634 trillion cubic feet, up 334 billion cubic feet from a year ago, but 123 billion cubic feet below the five-year average, the government said.

Short-Term Weather Outlook

According to NatGasWeather for August 1 to August 7, “Hot high pressure will rule the West and Plains with highs of upper 80s to 100s, hottest over the Southwest & Texas. Temperatures will be quite comfortable the next several days across the Midwest and Northeast with highs of 70s and 80s as a cool front pushes through. Additional weather systems with showers and cooling will arrive next week again over the Midwest and East while very warm to hot elsewhere. Overall, national demand will be moderate.”

Daily Forecast

We’re going to be watching the $2.203 to $2.227 area closely since this is the retracement zone that will determine the direction of the September natural gas futures market today.

A sustained move under $2.203 will indicate the presence of buyers. This could drive the market through this week’s low at $2.101.

A sustained move over $2.227 will signal the return of buyers. Profit-taking and short-covering will also contribute to the rally.

It looks like temperatures will be cooler next week, but this has been priced into the market for days. The catalyst for the next move in the market will be the forecast for after August 15.