Natural Gas

Natural Gas Price Fundamental Daily Forecast – Bulls Waiting for Clarity on End-of-Month Heat Forecasts

Natural gas futures are inching lower early Tuesday after failing to follow-through to the upside following yesterday’s strong performance. The market is being underpinned by solid liquefied natural gas (LNG) exports and lower production. Although some forecasts pointed to stronger weather-driven demand over the back half of July, the early price action suggests some traders are still skeptical about the predictions.

At 11:29 GMT, September natural gas futures are trading $3.746, down $0.008 or -0.21%.

Bespoke Notes Shift in Forecasts to Stronger Heat

Natural Gas Intelligence (NGI) reported that Bespoke Weather Services noted a shift in forecasts Monday to stronger heat than what outlooks showed prior to the weekend.

“The change was not large” in terms of total gas-weighted degree days, “but there are some notable shifts on the regional level, as the lower Midwest down to Texas appears set to finally see some heat after quite a tame period in recent weeks,” Bespoke said. “We are projecting highs in Dallas, for example, to reach the 100 degree mark a few times in the medium range, something of course not uncommon for this time of year, but definitely a change from what we have been seeing.”

The “most persistent, strongest anomalous heat stays in the north-central U.S.,” the firm added. “All in all, these changes take us closer to the five-year normal for the 15-day period as a whole.”

Consistent LNG Feed Gas Volumes

NGI reported that U.S. liquefied natural gas (LNG) levels have consistently topped 10 Bcf this month – LNG feed gas volumes approached 10.5 Bcf Monday – and at times have exceeded 11 Bcf amid strong demand from both Asia and Europe.

Concerns About Supply Adequacy Supportive

NGI wrote that concerns about supply adequacy also helped drive up prices, with production running lighter than demand.

Production has varied in July, with daily estimates ranging between 89 Bcf and 92 Bcf, impacted sporadically by summer maintenance work. Bespoke said output may need to exceed 92 Bcf over the back half of summer to offset strong demand.

Early Peek at This Week’s EIA Report

Looking ahead to Thursday’s Energy Information Administration storage report, NGI’s model is predicting a 30 Bcf injection for the week ended July 16. Bespoke estimated a storage increase of 42 Bcf

Daily Forecast

We could be rangebound until the forecasters get on the same page about the end-of-the-month forecast. Prices could pop higher if the forecasts call for greater cooling demand. We’re probably going to need to see lingering heat in order to generate a breakout to the upside.

On the bullish side, the early estimates for this week’s EIA report shows that guesses are coming in below the 38 Bcf build from a year-ago and the five-year average injection of 36 Bcf.

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James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.