Natural Gas Price Fundamental Weekly Forecast – Pressured by Potential Triple Digit Storage Build

Crude oil futures closed lower last week as speculators booked profits in reaction to forecasts of cooler temperatures over the near-term. Last week’s government report also contributed to the selling pressure. Some traders also started to price in this week’s storage report which may come in at triple digits.

For the week, July Natural Gas settled at $2.890, down 0.072 or -2.43%.

The EIA reported that domestic supplies of natural gas rose by 92 billion cubic feet for the week-ended June 1. The increase was in line with average expectations of analysts surveyed by S&P Global Platts.

However, since estimates were all over the map going into the report, some investors read the news as bullish, sending prices higher, while others saw it as a bearish number and drove prices lower.

Total stocks now stand at 1.817 trillion cubic feet, down 799 billion cubic feet from a year ago, and 512 billion below the five-year average.

The injection was 10.7% less than the 103 Bcf build reported in the corresponding week in 2017 as well as 11.5% under the five-year average injection of 104 Bcf, according to the EIA data.

As a result, stocks were 30.5%, below the year-ago level of 2.616 Tcf and 22%, under the five-year average of 2.329 Tcf.

Forecast

Forecasts for milder temperatures are likely to keep a lid on natural gas futures this week. Although we’re likely to see selling pressure, the current supply deficit could continue to provide some support. This is why the market is expected to continue to trade inside a wide range, but with a bias to the downside.

According to NatGasWeather.com, “The big question going into the weekend break is whether the hot ridge over the southern U.S. will shift over the East during the last 10 days of June, which some data suggests.”

“If this scenario were to gain momentum, weather sentiment will trend from neutral-slightly bearish for the third week of June to potentially slightly bullish after. The failure of the ridge expanding across the North and East U.S, however, could lead to disappointment the official summer season would be off to a slow start, the forecaster said.

Additionally, cooler trends are being predicted by European weather models. This combined with predictions for a triple-digit storage build for the week-ended June 8 in this week’s EIA report are expected to lead to lower prices this week.