NATURAL GAS

Natural Gas Price Fundamental Daily Forecast – Weather Concerns Remain the Key Issue

July natural gas is trading steady to better early Tuesday after a steep break the previous session. The market is currently trading $2.993, up $0.011 or +0.37%.

Prices plunged to their lowest levels since mid-March, putting the futures contract on a path towards the February 28 main bottom at $2.888, after the latest U.S. weather model called for mild temperatures over the next two weeks, which should reduce heating demand over that time period.

Early in the session on Monday, natural gas futures rallied after Saudi Arabia and other Arab states cut ties with Qatar, raising concerns about the natural gas supply. The primary worry was whether Qatar would be able to continue to supply liquefied natural gas (LNG).

Natural Gas
Daily July Natural Gas

Forecast

Traders are expected to continue to monitor the 2-week weather forecast and are not likely to begin buying aggressively until the weather models show the return of lingering hot temperatures. Periodic hot temps are just not going to cut it.

As of the week-ending May 26, total natural gas in storage stood at 2.525 trillion cubic feet, according to the U.S. Energy Information Administration, about 12.8% lower than levels at this time a year ago but 8.9% above the five-year average for this time of year.

Looking ahead to Thursday’s report for the week-ending June 2, traders are pricing in an increase of about 92 billion cubic feet.

This would put it above the previous week’s gain of 81 billion cubic feet, last year’s 65 billion cubic feet increase and slightly below the five-year average rise of 94 billion cubic feet.

Although technically oversold conditions may produce periodic short-covering rallies, these moves are likely to be short-lived until the weather turns more favorable for increased air-conditioner usage. Until then, the February 28 bottom at $2.888 remains a viable downside target.

Published by

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.