Natural Gas Price Fundamental Weekly Forecast – Warm Pattern to Drive Down Heating Demand

The short-term range is $2.135 to $2.745. If sellers can take out $2.532 this week with conviction then look for a two to three week break with $2.440 to $2.368 the next likely downside target.
James Hyerczyk
Natural Gas

Natural gas futures closed lower last week, producing a technical closing price reversal top in the process while signaling the start of the long awaited correction. If confirmed the market could trade lower for the next two to three weeks. The selling pressure was fueled by a larger-than-expected government storage report and a warm pattern into October that could curb heating demand.

Last week, November natural gas futures settled at $2.555, down $0.098 or -3.69%.

Bespoke Weather Services said the losses were attributed to “weakening cash prices and a “very bearish” EIA storage report.

Natural Gas Intelligence said, “Analysts at EBW Analytics Group also pointed to the potential for the widespread above-normal temperatures in the forecast to start having impact on demand as the calendar flips to October.”

“Over the next three weeks…as warmer-than-normal weather extends further into October, air conditioning demand will largely disappear and early-season space heating demand will remain depressed,” the EBW analysts said. “As this occurs, injections could reach the mid-90s to 100 Bcf level, eliminating the storage deficit versus the five-year average almost entirely by mid-October and limiting the potential for futures to rebound.”

Weekly U.S. Energy Information Administration Report

On Thursday, the EIA reported an 84 Bcf injection into U.S. natural gas storage for the week-ended September 13. This was higher than the consensus estimate of 75 Bcf.

Reuters analysts predicted a 78 Bcf consensus, with predictions ranging from 71 Bcf up to 85 Bcf. The Intercontinental Exchange EIA Financial Weekly Index futures contract settled at 86 Bcf on Tuesday. Natural Gas Intelligence’s model forecast a 79 Bcf build.

Last year, the EIA recorded an 84 Bcf build for the period, and the five-year average is an injection of 82 Bcf.

Stocks were 393 Bcf higher than last year at this time and 75 Bcf below the five-year average of 3,178 Bcf, according to the EIA data.

Short-Term Weather Outlook

According to NatGasWeather for September 23-29, “A messy pattern this week as numerous weather systems impact the US with showers and cooling. One system will track across the Midwest and New England the next couple days, while a more prominent cool shot will arrive mid-week across the Northwest to the Northern Plains. A warm tropical system will bring showers to the Southwest, cooling Las Vegas and Phoenix. Texas, South and Southeast will continue to be very warm to hot with highs of upper 80s to lower 90s for regionally strong demand. Overall, lighter demand this week versus last week and moderate to low mid-week before increasing next weekend.”

Weekly November Natural Gas

Weekly Forecast

The main trend is up according to the technical swing chart, but last week’s chart pattern indicates that momentum may be getting ready to shift to the downside. A trade through $2.532 will confirm the potentially bearish chart pattern. A move through $2.745 will negate the closing price reversal top and signal a resumption of the uptrend.

The main range is $3.035 to $2.135. Its 50% to 61.8% retracement zone at $2.585 to $2.691 is resistance. This zone essentially stopped the rally last week. The close under $2.585 is another sign of weakness.

The short-term range is $2.135 to $2.745. If sellers can take out $2.532 this week with conviction then look for a two to three week break with $2.440 to $2.368 the next likely downside target.

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