Natural Gas Price Fundamental Daily Forecast – Weather Forecasts Becoming Less Supportive

Natural gas futures are inching higher early Wednesday following a steep sell-off the previous session. The sell-off was a surprise as the industry is still dealing with a number of production outages in the Gulf of Mexico. However, it looks as if the sellers may have discounted that news and are now pricing in the possibility of milder temperatures in mid-September.

At 10:01 GMT, October natural gas futures are trading $4.622, up $0.054 or +1.18%.

Bespoke Sees Some Increased Production

Natural Gas Intelligence (NGI) reported that Bespoke Weather Services noted some production returning to the market, bringing the Lower 48 supply back to 91 Bcf/d.

“The bearish component comes via what looks like more of a loss in industrial demand thanks to the impact of Hurricane Ida, which is boosting estimates for this week’s” Energy Information Administration (EIA) storage report, Bespoke said. “Intuitively, one would think this is a short-term issue, as other components of the supply/demand balance remain strong, but after such a massive move higher over the last couple of weeks it does not take much bearishness in the data to pull the market back.”

Early Look at EIA Weekly Storage Report

NGI is modeling a below-average 38 Bcf injection into U.S. gas stocks for Thursday’s EIA report, which covers the week ended September 3. That would compare with a five-year average 65 Bcf injection. The year-earlier build for the period is also 65 Bcf.

Short-Term Weather Outlook

According to NatGasWeather for September 7-13, “The Midwest and Northeast will cool this week into the 60s and 70s as stronger fall-like cool fronts sweep through with scattered showers. California to Texas and the Southern Plains will remain very warm to hot with highs of mid-80s to 100s as high pressure dominates. Heavy showers will arrive into the Gulf Coast late in the week. Overall, national demand will be low across the northern U.S. but moderate to high across the western and southern U.S.

Daily Forecast

The main trend is up according to most technical indicators, but Tuesday’s reversal to the downside suggests the arrival of sellers. Some took profits, some initiated new short positions.

A trade through $4.774 will signal a resumption of the uptrend.

The first downside target is a 50% level at $4.495. Buyers could come in on the first test of this level.

If $4.495 fails as support then look for the selling pressure to increase with the next target zone support coming in at $4.326 to $4.263.

Fundamentally, NatGasWeather viewed days eight through 15 of its recent outlook as “quite bearish” in midday model runs Tuesday.

EBW Analytics Group added, how quickly Gulf of Mexico supply returns following Ida will be a key question for the market in the near term.

“If production shows signs of returning more quickly, however, downward price pressure on NYMEX gas is likely to intensify,” EBW Analysts said.