Natural Gas Price Fundamental Weekly Forecast – Buyers Trying to Build Base Ahead of Expected Heat
Natural gas futures posted a volatile trade last week, initially pushed higher when the August futures contract rolled off the board amid strong domestic cooling needs and robust demand for U.S. exports of liquefied natural gas (LNG) then driven lower into the close as forecasters predicted easing demand in the week ahead. However, this weakness could be short-lived as outlooks called for sweltering heat to return before mid-August, Natural Gas Intelligence wrote.
Last week, September natural gas futures settled at $3.914, down $0.128 or -3.17%. This is down from a high of $4.165.
Seven-Day Weather Forecast
According to NatGasWeather for August 1 to August 7, “National demand will ease to lighter levels this week as weather systems sweep across the eastern ½ of the U.S. with showers, thunderstorms, and highs of only 70s to lower 80s. The West into Texas and the Plains will be very warm to hot with highs of upper 80s to 100s as strong upper high pressure rules. Temperatures will increase across the South and East late next weekend with highs warming into the mid-80s to lower 90s. Overall, moderate national demand this week, then increasing to high late next weekend.”
Weekly US Energy Information Administration Storage Report
The U.S. Energy Information Administration (EIA) reported Thursday that domestic supplies of natural gas rose by 36 billion cubic feet for the week-ended July 23. Ahead of the report, NGI wrote that this week’s EIA storage report was expected to show an injection into storage in the low 40s Bcf.
NGI also reported a Reuters poll found projections ranging from a build of 33 Bcf to 52 Bcf, with a median injection of 42 Bcf. Results of a Bloomberg survey showed estimates spanning 34 Bcf to 49 Bcf, with a median of 41 Bcf and a Wall Street Journal survey produced estimates from 39 Bcf to 47 Bcf with an average of 43 Bcf. The NGI model predicted a 49 Bcf injection.
Total stocks now stand at 2.714 Tcf, down 523 Bcf from a year ago and 168 Bcf below the five-year average, the government said.
Last week’s storage report continued to show “tight supply/demand balances, and that likely will remain the case until production can make a significant push higher,” Bespoke Services said.
“Either weather needs to step in, be it by way of cooler trends, or with higher wind on a substantial basis, or production simply must grow to new 2021 highs in order to alleviate” supply concerns, Bespoke said. “On that weather side we do see higher wind forecast in the medium range, but also hotter temperatures, especially with respect to normal, as a more LaNina-ish pattern looks set to arrive, favoring heat…It remains difficult to argue against the overall bullish backdrop.”
What this means is that the market is still in “buy the dip” mode. There are three potential downside targets.
The short-term support zone is $3.869 to $3.751. The intermediate support zone is $3.830 to $3.751 and the main support zone is $3.660 to $3.54.
The major support cluster is $3.869 to $3.751. This zone stopped the selling on July 28 at $3.837.