Natural Gas

Natural Gas Price Fundamental Daily Forecast – Weighed Down by Rising Production, Could Strengthen Over $2.838

Natural gas futures are recovering slightly shortly before the regular session opening on Wednesday after early session weakness. Short-term oversold conditions could be contributing to the price action.

At 1124 GMT, October Natural Gas futures are trading $2.825, up $0.002 or +0.07%.

The market is also trying to rebound following a steep $0.093 or -3.29% drop on Tuesday, as record production over the long U.S. holiday week-end put downward pressure on prices.

According to S&P Global Platts Analytics, “U.S. dry gas production reached a record high over the long Labor Day Weekend, increasing to 83.4 Bcf/d Sunday. However, it did drop to 82.5 Bcf/d Tuesday.”

Platts Analytics also said “total demand – including exports to Mexico and LNG exports – decreased by 700 MMcf/d on the day to 75.8 Bcf/d Tuesday. Deliveries to the Sabine Pass terminal drove the U.S. drop, falling close to 600 MMcf/d.”

“The bearish sentiment continued Tuesday, with power burn totals in the Midwest falling 251 MMcf/d, to 3.04 Bcf/d,” according to Platts Analytics.

Forecast

Technically, the main range is $2.688 to $2.794. The market is currently testing its 50% to 61.8% retracement zone at $2.833 to $2.799. Trader reaction to this zone is likely to determine the near-term direction of the market.

Holding above $2.833 means that buyers are still coming in on the dips, holding out hope that the storage deficit will continue to remain a concern into the start of the winter heating season.

A drop through $2.799, on the other hand, may be a sign that buyers have finally thrown in the towel on the possibility that this summer’s rally will continue.

Traders may also believe that the supply-demand balance has grown enough over the short-term because of high production and low demand to drive storage injections higher as the summer cooling season comes to an end.

There is also evidence in the NYMEX winter strip that deferred contract traders are not as concerned about the storage deficit going into winter because strong production appears to be enough to offset future demand.

Look for an upside bias today if buyers can overtake $2.838. The downside bias will continue if $2.799 fails as support.

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.