Natural Gas Price Fundamental Weekly Forecast – Big Test for Bears Coming Up This Week, Will They Retain Control?

Natural gas prices surged to over $3.000/MMBtu for the first time since late January after short-term weather forecasts called for hot temperatures that are likely to lead to increased demand while curtailing efforts to rebuild gas in storage.

August Natural Gas finished the week at $3.015, up $0.121 or +4.18%.

Fundamentally, the U.S. Energy Information Administration reported that domestic supplies of natural gas rose by 96 billion cubic feet for the week-ended June 8. Traders were looking for an injection of 88 billion cubic feet.

The average over the last five years for the same week was a rise of 91 Bcf. Total stocks now stand at 1.913 trillion cubic feet, down 785 Bcf from a year ago, and 507 billion below the five-year average, the government said.

Forecast

Friday’s strong surge in prices above the psychological $3.000 level came as a surprise to traders especially after Thursday’s bearish EIA report. This suggests some panic buying by weak shorts. The price action probably reflects that hot temperatures in the coming days is going to suppress efforts to decrease the storage deficit.

As of last Thursday’s EIA report, the current stock level of 1.913 Trillion Cubic Feet is a 21% deficit from the five-year average of 2.42 Tcf, according to the EIA.

Prices could receive additional support early this week from the National Weather Service forecast of above-average temperatures for much of the country while the Southwest region is likely to experience cooler weather than usual.

According to Platts Analytics, demand is expected to reach 75.3 Bcf/d over the next eight to 14 days. Production is expected to rise to 78.3 Bcf/d over the next seven days.

Natgasweather.com until June 21, forecasts, “A hot upper ridge will dominate the central and southern US with highs of upper 80s to 100s for strong demand. Heat will also spread across the Midwest late Saturday and then into the East Sunday-Tuesday for strong demand as highs reach the mid-80s to mid-90s. The West will be very warm with highs of 80s to 100s besides the Northwest, then cooling this weekend as showers push inland. Late next week, the hot southern US upper ridge will weaken less intense heat, while the northern US is mostly comfortable with 70s and 80s.”

It looks as if we could see a short-term spike into $3.040 before we expect to see hedgers take control. The weather forecasts indicate short-term heat so we expect to see a short-term move. If the weather services put the word “lingering” into the forecast then the rally could be extended into next week. This would be a bullish development.

The charts indicate there is plenty of room to the upside over $3.041. We’ll find out this week if the buying is strong enough to sustain a move over this price level.