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Natural Gas Price Fundamental Daily Forecast – Weakens Under $2.751, Strengthens Over $2.799

By:
James Hyerczyk
Published: Jul 13, 2018, 11:58 UTC

Prices fell on Thursday despite the Energy Information Administration’s (EIA) weekly natural gas storage report showing a miss to the low side of most estimates. Improving weather conditions and relatively high production levels remain the primary drivers of the price action.

Natural Gas

Natural gas futures are trading nearly flat on Friday after posting a lower close the previous session. The market is currently trading inside the previous day’s range for a second session, suggesting investor indecision and impending volatility.

At 1137 GMT, September Natural Gas futures are trading $2.766, unchanged.

Oversold technical factors may be driving this week’s mostly sideways price action after broke from $2.992 to $2.751 in eight trading sessions. It seems traders are trying to decide whether to resume the selling pressure with the May 7 bottom at $2.711 the next target, or book profits in an effort to trigger a short-covering rally and a possible retracement into $2.871 to $2.900. Since the trend is down, a short-covering rally into this zone will likely draw the attention of sellers.

Prices fell on Thursday despite the Energy Information Administration’s (EIA) weekly natural gas storage report showing a miss to the low side of most estimates. Improving weather conditions and relatively high production levels remain the primary drivers of the price action.

According to the EIA, producers injected 51 Bcf into Lower 48 gas stocks for the week-ended July 6, lower than the 59 Bcf injected last year and well-below the five-year average 77 Bcf build. Going into the report, major surveys showed traders were looking for a build of about 56 Bcf.

Reuters was looking for a build of 56 Bcf, with a range of 47 Bcf to 67 Bcf. Bloomberg called for a median 55 Bcf injection, with a range of 34 Bcf to 67 Bcf. The ICE EIA Financial Weekly Index futures contract had settled at 49 Bcf on Wednesday. Bespoke Weather Services was predicting a 54 Bcf build.

The EIA report also showed that total working gas in underground storage stood at 2,203 Bcf as of July 6, versus 2,928 Bcf a year ago and five-year average inventories of 2,722 Bcf. Week/week the year-on-year deficit widened from minus 717 Bcf to minus 725 Bcf, while the year-on-five-year deficit increased from minus 493 Bcf to minus 519 Bcf, EIA data show.

Forecast

The chart pattern suggests the market is set up for a volatile move. Prices could move higher over the near-term if $2.799 is taken out with conviction. If volume increases on the move, we may even see a rally into $2.871. A break through $2.751 on rising volume could trigger a breakdown into $2.711.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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