Natural Gas Price Fundamental Weekly Forecast – Oversold Conditions Could Lead to Short-covering

Natural gas futures posted a volatile week, driven lower by temperatures that were expected to come in average to below average over the next two-weeks.

August Natural Gas futures settled the week at $2.951, down $0.109 or -3.56%.

According to the EIA, U.S. natural gas stocks increased by 61 billion cubic feet for the week-ending June 16. This fell inside the estimated range, but came in higher than the consensus estimate of 56 Bcf.

The five-year average for the week is an injection of 82 billion cubic feet, and last year’s storage injection for the week totaled 63 billion cubic feet. Natural gas inventories rose by 78 billion cubic feet in the week-ending June 9.

Stockpiles fell week over week to 10.5% below last year’s level, but remain 8.1% above the five-year average.

Additionally, the EIA reported that U.S. working stocks of natural gas totaled about 2.770 trillion cubic feet, around 207 Bcf above the five-year average of 2.563 trillion cubic feet and 324 Bcf below last year’s total for the same period. Working gas in storage totaled 3.094 Tcf for the same period a year ago.

Forecast

The overall trend of the market is expected to continue to be determined by the weather. However, oversold technical conditions make the market ripe for a counter-trend short-covering rally.

According to natgasweather.com: “It remains dangerously hot over the Southwest into W. Texas where highs will exceed 100°F, closer to 120°F for Las Vegas and Phoenix. Over the East, temperatures will be quite warm with highs of 80s to lower 90s as high pressure briefly returns. Although, yet another cool shot will push into the north-central US this weekend, then across the East early next week for a return to lighter than normal demand. Finally, remnants from T.S. Cindy will bring heavy rains to the east-central US the next few days.”