Natural Gas Price Fundamental Weekly Forecast – Bulls Hoping for Robust Power Burns to Continue

Natural gas futures finished the week with a slight gain, helped by technically oversold conditions, a friendly government storage report and expectations of continued heat into early August. The news was just enough to scare some of the weaker shorts out of the market, but not nearly enough to change the trend or market sentiment to bullish.

U.S. Energy Information Administration Weekly Storage Report

The EIA reported last Thursday that domestic supplies of natural gas rose by 37 billion cubic feet for the week-ended July 17. Traders were looking for a sub-100 Bcf storage injection for the four consecutive weeks. The consensus was for a storage injection of 37 Bcf. Analysts polled by S&P Global Platts were looking for an increase of 33 Bcf.

Total stocks now stand at 3.215 trillion cubic feet, up 656 billion cubic feet from a year ago, and 436 billion cubic feet above the five-year average, the government said.

Short-Term Weather Outlook

According to NatGasWeather for July 27-August 2:  Remnants of Hannah continue to bring heavy showers over areas of Texas and the Gulf Coast with comfortable highs of low 80s. A weak system is also tracking across the Northern Plains/Midwest with showers and pleasant highs of 70s-80s. The rest of the U.S. is quite hot with mid-90s over much of the South and East, including mid-90s for major Northeast cities. It’s also hot over the West and Northwest with 90s and 100s, aiding strong national demand. However, cooling over Midwest will reach the Northeast mid-week for lighter national demand.”

Weekly Forecast

The charts indicate that a potentially bullish secondary higher bottom may be forming, but whether investors can sustain last week’s gains will be determined by continued strong summer demand. At the end of the week, it was “so far so good” as storage capacity concerns eased and power burns were robust.

Perhaps helping to put a floor on the market over the near-term are reports of signs of an improving liquefied natural gas (LNG) market. Shipbroker

Fearnleys AS noted news reports of fewer U.S. LNG export cancellations heading into the fall and said the trend signals a potential recovery in the making. Perhaps the new massive EU stimulus package announced last week will lead to increased European demand.

Finally, traders surveyed by Bloomberg estimated that between 20 and 30 U.S. LNG export cargoes would not get loaded in September, but that would represent notable and continuing improvement. After all, the number of cancellations for July was 50 and 35-40 for August.

For a look at all of today’s economic events, check out our economic calendar.