Natural Gas Price Fundamental Daily Forecast – Weather Moderate; Bullish Over $3.011, Bearish Under $2.934

Natural gas futures spiked to the upside on Thursday in reaction to a government report that showed domestic supplies in storage rose less than anticipated last week. The rally was a normal response to the data and no one should read into it.

The market played a series of retracement levels that it must plow through before we can actually say that prices have turned higher. Also, keep in mind that the data is stale and just like last week’s report, investors are already looking about two weeks ahead.

September natural gas futures finished the session at $2.967, up $0.053 or +1.82%.

According to the U.S. Energy Information Administration, natural gas storage in the U.S. rose by 17 billion cubic feet in the week-ended July 21, below forecasts for a build of 24 billion. That compared with a gain of 28 billion feet in the previous week, an increase of 17 billion a year earlier and a five-year average rise of 47 billion cubic feet.

The EIA also said that total gas in storage currently stands at 2.990 trillion cubic feet. This is 9.2% lower than levels at this time a year ago but 3.7% above the five-year average for this time of year.

Forecast

Was it increased air-conditioning demand that led to the lower than expected storage injection? Higher exports? Lower production?  All three of these factors could’ve contributed to the number. However, traders are likely to focus on the weather until about September 1 then the other factors may become more important as we approach the winter heating season.

Looking ahead to the week-end and then to August 3, according to natgasweather.com, “Another weather system with cooling will arrive Friday through Monday over the East, and then track across the south-central U.S. during the middle of next week for near normal national demand.”

“Hot high pressure is expected to re-strengthen and gain ground late next week over the southern 2/3 of the country, while remaining mostly comfortable over the North. Overall, natural gas demand will be moderate to high.”

Essentially, we’ll be looking for heat in the sparsely populated south and cooler temperatures in the highly populated north. This doesn’t bode well for a jump in demand.

Natural gas could chop around a series of retracement levels at $2.934, $2.966, $2.984 and $3.011 most of the session on Friday.

A sustained move over $3.011 will set a bullish tone while a sustained move under $2.934 will signal the return of sellers.