Natural Gas Weekly Fundamental Analysis, August 31 – September 4, 2015 Forecast

Weekly Analysis and Recommendation: 

October Natural Gas futures tumbled early last week in response to turbulence in the financial markets and milder temperatures across key demand areas. The selling stopped at $2.641, slightly above the June 4 bottom at 2.640. The ensuing short-covering rally produced a potentially bullish reversal on the weekly chart.

After reaching its low on August 24, natural gas remained range bound. The market surged into the close on Friday in response to the strong rally in the crude oil market.

According to the U.S. Energy Information Administration (EIA), U.S. natural gas stocks increased by 69 billion cubic feet for the week-ending August 21. Analysts were expecting a storage injection of 61 billion cubic feet. The five-year average for the week is an increase of around 61 billion cubic feet, and last year’s addition for the week totaled 88 billion cubic feet.

Natural gas futures initially weakened on the news, but recovered into Friday’s close. The price action is being driven more by oversold technical factors at this time rather than fundamental factors. Last week’s strong rebound rally may have created enough upside momentum to continue the rally early next week, but no one expects the main trend to turn higher due to the huge supply.

Don’t be surprised by a follow-through rally early next week since natural gas prices could piggy-back another sharp rise in crude oil prices. Any rally is likely to be capped, however. The supply is just too large to expect extended gains.

Weather could play a role in extending last week’s rally as temperatures are expected to be above normal from the Midwest through the Northeast over the next 15 days.

Prices should remain lower until at least the end of October. Production is expected to continue to rise modestly. The week will begin with stockpiles about 18% above their levels of a year ago and about 2.9% above the five-year average.

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. 

AccuWeather US Forecast Outlook: 

Economic Events: Although the major weather story this week is expected to be the tropical storm bearing down on Florida, it is not expected to have a major impact on natural gas prices. This is because reduced offshore oil and natural gas production. 

Hurricane-related risk to total U.S. crude oil and natural gas production has decreased over recent years as the share of total U.S. production originating in the Gulf of Mexico has declined sharply. In 1997, 26% of the nation’s natural gas was produced in the Gulf of Mexico; by 2014, that share had declined to 5%. 

Temperatures are expected to be above normal from the Midwest through the Northeast over the next two weeks. 

Over the next 7 days, high temperatures in Chicago are expected to range from 80 to 89 degrees. 

St. Louis, Mo could see high temperatures ranging from 90 to 93 degrees. 

In New York, NY, high temperatures are expected to range from 86 to 93 degrees. 

WEEKLY

Natural Gas Weekly Update

• Release Schedule: Thursday between 2:00 and 2:30 p.m. (Eastern Time)
• Weekly Natural Gas Storage Report
  Release Schedule: Thursday at 10:30 (Eastern Time) (schedule)