Natural Gas Price Fundamental Daily Forecast – Weakens Under $2.253, Strengthens Over $2.296

Natural gas prices are trading lower on Wednesday shortly before the regular session opening. Traders are saying mixed cash market prices may be behind the selling pressure with demand stronger in the West and weaker in the East. A change in the short-term weather forecast is also pressuring prices. Yesterday’s midday forecast called for warmer temperatures at the end of July, but a little cooler for the first week of August.

At 12:02 GMT, September natural gas is trading $2.249, down 0.026 or -1.20%.

Spot Prices

According to Genscape, a heat wave blanketing the western United States should support higher basis differentials for pricing locations from the Pacific Northwest to the Rockies to Southern California through the end of this week.

Natural Gas Intelligence said, “For the most part, spot prices were steady east of the Rockies Tuesday, with cooler conditions moving across much of the Lower 48 following intense heat over the weekend.”

Short-Term Weather Outlook

According to NatGasWeather for July 23-29, “A cool front with showers and thunderstorms will continue advancing through the southern and eastern US the next few days, easing highs into the 70s & 80s for much lighter demand. Hot high pressure will rule the West with highs of upper 80s to 100s, hottest over the Southwest into West Texas. Temperatures will warm across the southern US, Midwest and Mid-Atlantic Sunday through Tuesday with highs of upper 80s to 90s gaining. Overall, national demand will be moderate through Saturday then high.”

Mid-Term Weather Outlook

“Timing of major weather features to impact the U.S. the next two weeks remains on track, with light national demand through Friday on strong cooling east of the Rockies, then increasing this weekend through early August as a warmer U.S. pattern returns,” NatGasWeather said. “…We continue to see flaws in the late July and early August pattern where systems will be able to provide areas of showers and cooling across the southern and central or east-central U.S. to prevent widespread heat.”

“So while the pattern next week into early August is a relatively warm one with widespread highs of upper 80s to 90s, it still might not drop weekly builds under five-year averages.”

Early Look at Energy Information Administration Weekly Storage

Energy Aspects said it expects the EIA weekly storage report to show a 31 Bcf build for the week-ending July 19.

Daily Forecast

Technical factors should pay a major role in the price action today. The main range is $2.115 to $2.476. Its 50% to 61.8% retracement zone is $2.296 to $2.253. Trader reaction to this zone should set the tone on Wednesday.

Currently, September natural gas futures are trading on the weak side of the retracement zone, giving it an early downside bias.

Taking out $2.211 will negate Monday’s closing price reversal bottom and signal a resumption of the downtrend. This could trigger an acceleration to the downside with $2.115 the next major downside target.