Natural Gas Price Fundamental Daily Forecast – Weather Forecasts Balanced, EIA Report Most Important Today

Natural gas futures successfully tested retracement level support for a second session on Wednesday before closing slightly better. The price action merely suggests buyers are coming in on dips as expected. Concerns over the supply deficit are encouraging buyers to step in on weakness.

Aggressive counter-trend short sellers could also be taking profits on the dips, or covering their positions ahead of today’s U.S. Energy Information Administration’s weekly storage report.

On Wednesday, July Natural Gas settled at $2.896, up $0.006 or +0.21%.

The price action has been relatively tame this week, following Monday’s steep sell-off. Most of the price action has been fueled by weather forecasts calling for milder temperatures over the short-run. These reports have caused longer-term bulls to adjust their positions to reflect the changes.

The price action is also saying that concerns over a supply deficit may be enough to prevent a sharp sell-off, but not bullish enough to drive the market through or even sustain a rally over $3.000. If by chance, conditions changed to the better for the bulls, I think a move to between $3.000 and $3.040 would be a gift to those looking to put on short hedges.

Forecast

Prices are recovering early Thursday ahead of the EIA report. At 0920 GMT, July Natural Gas is trading $2.916, up 0.020 or +0.69%.

The first support zone is $2.899 to $2.877. The second is $2.858 to $2.826.

On the upside, the first potential resistance zone is $2.932 to $2.948. This area is followed by main tops at $3.000, $3.010 and $3.043.

The weather outlook is balanced so the price action today will be determined by the EIA report.

This week’s EIA report for the week-ending June 1, includes Memorial Day. It often corresponds with a strong storage injection. Market estimates range from 77 Bcf to 98 Bcf. Bloomberg is calling for a median estimate of an 89 Bcf build. Reuters is looking for a 90 Bcf injection.

Last year, a build of 103 Bcf was reported by the EIA, and the five-year average build stands at 104 Bcf.

Although historically, this report calls for a triple digit build, this year’s number is expected to come well below last year’s number and the five-year average. However, the price action suggests that this has already been built into the market.

Therefore, in order to trigger a spike to the upside, I think the bulls are going to need something in the low 80’s.