Natural Gas Price Fundamental Daily Forecast – Weather Remains Hot, but Virus Concerns Weigh on Demand Recovery

Natural gas futures are trading lower on Wednesday shortly before the regular session opening. Traders are still debating whether expectations for strong near-term cooling demand are still relevant after the news triggered a short-covering rally the previous session. Also generating some support are new indications that U.S. exports could recover later in 2020.

At 11:15 GMT, September natural gas is trading $1.674, down $0.040 or -2.33%.

My chart work suggests the market will have to form a support base before we can take any rally seriously. Even after that, the market is going to have to move above retracement levels at $1.738 and $1.768. Finally, a trade through $1.845 will change the main trend to up. With the main trend down, however, sellers are likely to continue to refresh positions on a test of these levels.

Short-Term Weather Outlook

According to NatGasWeather for July 22 to July 28, “Hot high pressure continues to stretch from California to Texas with highs of mid-90s to 110s, while uncomfortably hot and humid with 90s across the South, Southeast and Mid-Atlantic Coast. The Northwest will be hot one more day with highs into the 90s, then cooling Thursday through Saturday as weather systems arrive. Cooler expectations continue across the Northern Plains/Midwest as weak cool fronts with showers track through. The Great Lakes and northeastern U.S. will cool next week as a weather system arrives with showers and highs of 70s-80s.”

Bloomberg Reports Potentially Bullish LNG Development

Traders surveyed by Bloomberg estimated that between 20 and 30 U.S. liquefied natural gas (LNG) export cargoes would not get loaded in September. That is down from 50 for July and an estimated 35-40 for August, indicating U.S. gas demand from leading consumers in Asia and Europe is gradually recovering. Gas prices on both continents are trading at a premium to the U.S. benchmark.

Daily Forecast

The weather forecasts remain bullish despite some moderations. However, the direction of the market is still likely to be dictated by the coronavirus pandemic. According to Natural Gas Intelligence, “Analysts said these new outbreaks could stunt economic recoveries that had started to take root in May, when both U.S. employment and consumer spending data improved.”

Furthermore, President Trump didn’t help demand concerns much when he warned late Tuesday the coronavirus pandemic in the United States will probably “get worse before it gets better.”