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Natural Gas Weekly Fundamental Analysis, August 24 – August 28, 2015 Forecast

By:
James Hyerczyk
Updated: Aug 22, 2015, 11:51 UTC

Weekly Analysis and Recommendation:  October Natural Gas futures finished at a two-month low last week on demand worries. With the market now past

Natural Gas Weekly Fundamental Analysis, August 24 – August 28, 2015 Forecast

NATURAL GAS 1
Weekly Analysis and Recommendation: 

October Natural Gas futures finished at a two-month low last week on demand worries. With the market now past historical peak summer demand, traders are worried that milder temperatures will lead to increased stockpiles.

The latest U.S. Energy Information Administration (EIA) storage report for the week-ending August 14 was below expectations, triggering a short-covering rally last Thursday. However, this rally was short-lived as it gave bearish traders a chance to refresh positions at more favorable prices.

According to the EIA, U.S. natural gas stocks increased by 53 billion cubic feet. Analysts were expecting a storage injection of 70 billion cubic feet. The five-year average for the week is an increase of around 54 billion cubic feet, and last year’s addition for the week totaled 86 billion cubic feet.

Usage was down last week as cooler temperatures pushed into key demand areas. The forecast for this week calls for cool temperatures in the Midwest. However, warm temperatures in the west are expected to continue and the east coast is expected to remain hot.

Prices are expected to remain low with traders showing increased sensitivity to the weekly supply/demand reports. The trend is expected to remain down. There may be a few periodic rallies, but these are likely to be fueled by short-covering. They will also set up fresh shorting opportunities.

As the cool season approaches, prices are expected to remain under pressure. Stockpiles are about 19% above their levels of a year ago and about 2.7% above the five-year average.

According to the EIA, U.S. working stocks totaled about 3.030 trillion cubic feet, around 80 billion cubic feet above the five-year average of 2.950 trillion cubic feet and 488 billion cubic feet above last year’s total for the same period. Working gas in storage totaled 2.542 trillion cubic feet for the same period a year ago.

Look for this price action to be pretty close to the activity we saw last week. The downside bias should dominate the trade, however, traders are likely to overreact to a below-estimate storage report.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks. 

Weekly October Natural Gas
Weekly October Natural Gas

  AccuWeather US Forecast Outlook: 

This week, moderating heat will likely cut air conditioner use and fuel demand from power plants. Temperatures will be seasonal across most of the lower 48 states August 26 through August 30.   

Temperatures in Boston, MA this week are expected to range from 64 to 83 degrees. However, 4 out of 5 days temperatures are expected to remain in the mid-70’s. 

Temperatures in New York, NY are expected to range from 68 to 86 degrees. 

Chicago, Illinois is expected to see temperatures ranging from 58 to 78. St. Louis is expected to range from 55 to 80. 

Simply put, the above average temperatures are coming to an end. This should pressure prices because production is expected to increase at the same time demand is declining. 

Economic Events: 

WEEKLY

Natural Gas Weekly Update

 

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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