Natural Gas Price Fundamental Weekly Forecast – Over $2.921 Bullish, Under $2.892 Bearish

Natural gas futures reached their high for the week on Monday, August 14 with prices dropping more than one-percent on profit-taking after a strong two-week rally. The closing price reversal on the daily chart set-up a three-day break. The rally drove the market to its highest level since July 21, but buyers couldn’t sustain the move over $3.040 or the psychological $3.000 level.

Natural gas futures hit their low for the week on Thursday, August 17 at $2.886. The subsequent reversal came after the Energy Information Administration (EIA) announced a technical adjustment in the way it records inventory, the report was actually bearish.

October Natural Gas futures settled at $2.930, down 0.079 or -2.63%.

The EIA said in its weekly report that natural gas storage in the U.S. rose by 53 billion cubic feet in the week-ended August 1, above the median forecast of 47 billion and the high end of the range at 51.

That news compares with a gain of 28 billion feet in the preceding week, a build of 22 billion a year earlier and five-year average rise of 50 billion cubic feet.

Total natural gas in storage currently stands at 3.082 trillion cubic feet, 7.6% lower than levels at this time a year ago but 1.8% above the five-year average for this time of year.

Forecast

The week-ended with the market trading slightly above its two-week range. The key area to watch is $2.921 to $2.892. A trade over $3.042 will indicate that upside momentum is increasing. A move through $2.799 will signal a resumption of the downtrend.

The core weather forecast is putting a cap on prices, easing concern on supply tightening situation. Last week’s higher than expected injection also helped limit gains.

Looking down the road, analysts are saying utilities probably would stockpile just 1.7 trillion cubic feet of gas during the April-October injection season. Relatively low output, rising sales abroad and higher-than-average cooling demand earlier this summer are limiting the quantities going into storage. The projected build, which is below the five-year average of 2.1 tcf, would put inventories at 3.8 tcf at the end of October, below the year-earlier record of 4.0 tcf and the five-year average of 3.9 tcf.

According to natgasweather.com, “A hot ridge will strengthen and expand to cover most of the country late this weekend through the middle of this week for much stronger than normal demand. Overall, national gas demand will be high through Wednesday, then moderate.

This forecast is probably baked into the price since we’ve seen it all week. If the new forecast calls for increased heat the last week in August then we could see another price surge. Otherwise, look for a two-sided trade with the market straddling $2.921 to $2.892 most of the week.