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Natural Gas Price Fundamental Daily Forecast – Weakens Under $2.800, Strengthens Over $2.812

By:
James Hyerczyk
Published: Sep 14, 2018, 10:06 UTC

Total working gas at 2,636 is now below the five-year historical average. At the historical pace of injections for this time of year from the week-ending September 7 to November 1, storage is expected to peak at approximately 3.3 Tcf before the switch to withdrawals in early November. If this were to occur, it would be the lowest level to start the heating season since 2005 when stocks peaked at 3.2 Tcf. However, high production could curtail any price spikes.

Natural Gas

Natural gas futures are trading lower early Friday, following the release of the U.S. Energy Information Administration Weekly storage report on Thursday. The price action suggests the number was above trader expectations. The consensus was 65 billion cubic feet with some guesses coming in as high as 70. With the report out of the way, traders will probably base their decisions on the weather and production.

At 0938 GMT, November Natural Gas is trading $2.792, down $0.008 or -0.29%.

EIA Report

On Thursday, the EIA said U.S. natural gas in storage increased by 69 Bcf to 2.636 Tcf for the week-ended September 7.

The injection was less than both the 87 Bcf build reported during the corresponding week in 2017 and the five-year average addition of 76 Bcf, according to the EIA data.

Consequently, stocks were 662 Bcf, or 20%, less than the year-ago level of 3.298 Tcf and 595 Bcf, or 18%, less than the five-year average of 3.232 Tcf.

Additionally, the build was more than last week’s 63 Bcf build. This was because cooler temperatures across the South dropped gas-fired power generation by 7 Bcf, with estimates in Texas reaching the lowest levels since June, as reported by S&P Global Platts Analytics.

Platts also said, the East region added 20 Bcf to 659 Bcf, which was 103 Bcf less than the five-year average. The Midwest gained 32 Bcf to 734 Bcf and is now 155 Bcf below average. A 4-Bcf injection in the Mountain region brought stocks up to 166, or 29 Bcf less than average, while the Pacific also added 4 Bcf to 250 Bcf, compared the five-year average of 326 Bcf. South Central posted a 7-Bcf injection, bringing volumes to 806 Bcf, which is 226 Bcf below average.

Forecast

Total working gas at 2,636 is now below the five-year historical average. At the historical pace of injections for this time of year from the week-ending September 7 to November 1, storage is expected to peak at approximately 3.3 Tcf before the switch to withdrawals in early November. If this were to occur, it would be the lowest level to start the heating season since 2005 when stocks peaked at 3.2 Tcf. However, high production could curtail any price spikes.

November Natural Gas futures traders are likely to base their trading decisions today on the short-term retracement zone at $2.812 to $2.800.

Look for a downside bias on a sustained move under $2.800. If this creates enough downside momentum then we could see a test of the bottom at $2.764.

A sustained move over $2.812 will signal the presence of buyers. This could fuel an intraday short-covering rally with $2.859 the upside target. A trade through this top will change the main trend to up.

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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