Natural gas futures are trading lower on Monday shortly after the regular session opening. The market is being pressure by moderating weather patterns, rising storage and weak demand for LNG.
Ahead of the weekend, national demand was expected to be quite strong with highs of 90s to 100s over much of the U.S., including Chicago to New York City. However, based on the mildly lower opening, it looks as if traders were unimpressed by the news.
At 11:57 GMT, September natural gas futures are trading $1.740, down 0.025 or -1.42%.
Short-Term Weather Outlook
According to NatGasWeather for July 20-26, “Very hot upper high pressure continues to stretch from California to Texas with highs of mid-90s to 110s, while uncomfortably hot and humid across the South, Southeast and East with highs of mid-90s, including NYC. The Northwest is also hot with highs into the 90s in most areas. Cooler expectations this week will be across the Northern Plains/Midwest as weak weather systems/cool fronts track through. Overall, strong to very strong national demand this week with highs of upper 80s to 100s ruling most of the country besides the Northern Plains/Midwest.”
Bearish Factors Offsetting the Hot Temperatures
One bearish factor is the surge in U.S. coronavirus cases. Traders fear this will weigh on demand because it could lead to an extended shutdown of schools and office building that usually require air conditioning.
The surge is also threatening commercial and industrial energy demand domestically as well as demand for U.S. LNG exports to Europe and Asia. Natural Gas Intelligence (NGI) said, “Exports already are well below pre-pandemic levels, and cargo cancellations have become commonplace as the virus persists.”
The U.S. Energy Information Administration in its latest Short-Term Energy Outlook said that 110 U.S. cargoes were canceled for June-August lifting.
The daily chart turned bearish again last Thursday and the weak pattern was reaffirmed on Friday and earlier today.
Our work suggests the market could begin to accelerate to the downside if sellers can sustain a break under $1.738.
Holding inside $1.786 to $1.738 will indicate a neutral market.
A sustained move over $1.786 will indicate the short-covering is getting stronger. A trade through $1.845 will change the main trend to up.
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