Natural Gas Price Fundamental Weekly Forecast – Sideways Trade Expected

Last week, natural gas prices rose to their highest level in three weeks after data from the U.S. Energy Information Administration (EIA) showed domestic supplies of natural gas rose by 28 billion cubic feet (bcf) for the week-ending August 4. Analysts and traders had priced in a build of 37 bcf.

October Natural Gas futures settled at $3.009, up $0.192 or +6.82%.

According to the EIA, total natural gas in storage currently stands at 3.038 trillion cubic feet, 8.3% lower than levels at this time a year ago but 2% above the five-year average for this time of year.

Forecast

The EIA’s lower-than-expected build may have been a surprise, catching some of the weaker shorts off-guard, but the price action suggests the market is still in the hands of a few major shorts.

Without weather to support the rally, I think the upside is limited. Short-covering, buy stops and some light speculative buying will only carry this market so far before it becomes attractive enough for the major short-sellers.

According to natgasweather.com for August 11 to August 17:  Weather system with cooler than normal temperatures will continue across the central and northern US into early next week where highs will only reach the 70s and lower 80s.  It will be very warm to hot across much of the western and southern US with highs of upper 80s to 100s, but also with areas of showers and thunderstorms.  Overall, demand will be near normal due to much of the northern half of the US being comfortable and lacking summer heat.  Overall, national nat gas demand will be moderate.

The weekly chart indicates there is room to the upside with $3.096 to $3.114 potential upside targets.

On the downside, support is layered at $2.968, $2.927, $2.899 and $2.872.

Without a serious weather threat, we’re looking for a sideways trade.