Natural Gas Price Fundamental Weekly Forecast – Sideways Until New Weather Forecasts are Released

Despite spiking to its highest level since the week-ending February 2, Nearby Natural Gas futures settled lower for the week. Speculators fueled the attempted breakout to the upside in anticipation of above average temperatures, but a change in the weather forecast encouraged profit-taking, driving prices lower for the week.

For the week, August Natural Gas settled at $2.945, down $0.070 or -2.32%.

The new forecast calls for average temperatures until July 1 then the possible return of above average temperatures. These forecasts have essentially neutralized the bulls and bears, leading to a possible sideways to lower trade until the next weather forecast clarifies the temperature forecast for after July 1.

Weekly Storage Report

On Thursday, the U.S. Energy Information Administration reported that domestic supplies of natural gas rose by 91 billion cubic feet (Bcf) for the week-ended June 15. Traders had priced in an increase of 85 Bcf, while the average over the last five years for the same week was a rise of 83 Bcf.

That compared with a build of 96 Bcf in the preceding week, an increase of 61 Bcf a year earlier and a five-year average rise of 95 Bcf.

According to the EIA, total stocks now stand at 2.004 trillion cubic feet (Tcf), down 757 Bcf from a year ago, and 499 Bcf below the five-year average.

Forecast

Given the supply deficit, any signs of above average heat, or lingering high pressure domes should send prices soaring. Currently, the supply deficit is 27.4% lower than levels at this time a year ago, and about 19.9% below the five-year average for this time of year.

The short-term weekly range is $2.727 to $3.043. Its 50% to 61.8% retracement zone at $2.885 to $2.848 is controlling the direction of the August Natural Gas futures contract.

The upside bias should continue on a sustained move over $2.885. A downside bias could develop on a sustained move under $2.848.

Overtaking and sustaining a rally over $3.043 cold spike the market higher.

The current weather forecasts call for cooler temps at the start of the week in key demand areas throughout the Midwest and parts of the East then the return of heat later in the week. Therefore, overall demand is expected to be moderate to increasingly high.

We’re looking for a sideways trade early in the week then the return of volatility after the new 6 to 10 day forecast is released. Any mention of above-average temperatures or a lingering high pressure dome will be bullish for prices.