Natural Gas Price Fundamental Daily Forecast – Weather Concerns Limiting Gains, Tight Supply Still Supportive

Natural gas futures plunged on Monday as investors took profits in response to forecasts for cooler temperatures that could lead to lower demand over the next 10 to 14 days. There was no evidence of speculative shorting because bullish seasonality and slightly tighter-than-expected storage data are preventing investors from turning too bearish. However, we may have seen some real hedging.

July Natural Gas futures settled at $2.930, down $0.032 or -1.09%.

According to NatGasWeather.com for the period June 4 to June 10, “A weather system and associated cool front will sweep through the Northeast and Mid-Atlantic the next few days with showers and cooler than normal temperatures with highs of only upper 50s to lower 70s.  An upper ridge will dominate the western, central and southern US with highs of 80s to 100s, although a touch cool over the Northwest. Late in the week, hot high pressure will expand to cover most of the country besides the Northwest and Northeast with stronger than normal demand.”

Forecast

Early indications are that this week’s EIA report for the week-ending June 1 will again see injections fail to eclipse the triple-digit mark, potentially growing deficits in the process.

According to The Desk’s Early View, natural gas storage survey respondents on average are expecting a 91.5 Bcf build for the period, with a median of 91 Bcf. That’s versus 103 Bcf recorded last year and a five-year average 104 Bcf injection.

The weather patterns are essentially neutral which means the market could become rangebound with potential downside target retracement zones at $2.899 to $2.877 and $2.858 to $2.826.

Brief rallies are possible over the short-run, but cash market supply is probably not tight enough to sustain a rally over $3.00.

If the market becomes rangebound, then this will mean traders are essentially saying they want to see hotter temperatures in June to produce and sustain a breakout to the upside.