Natural Gas

Natural Gas Price Fundamental Daily Forecast – Moving Higher as Traders Reassess Impact of Recent EIA Data

Natural gas futures are trading higher in the pre-market session as last week’s rally appears to be set to resume following a two-day setback. Lower production and expectations of a hot summer are driving the price action although some will argue that the latter reason to buy is a little ahead of schedule.

Although some traders are focusing on the expected summer heat, others are watching cooler-trending weather systems moving across the central and northern United States by the middle of the week.

At 11:38 GMT, June natural gas is trading $2.965, up $0.034 or +1.16%.

Short-Term Weather Outlook

NatGasWeather said a mostly comfortable pattern will rule the U.S. Sunday – Monday with highs of 60s to 80s besides hotter 90s in Texas. However, a fresh round of cooler than normal weather systems will push into the central and northern U.S. mid-week with highs of 50s & 60s, including cooler highs of 70s into Texas and the South. Overall, swings between low and moderate demand the next 7-days.

NatGasWeather went on to say that its weather models were showing cooler-trending weather systems moving across the central and northern United States by the middle of the week. The chilly weather was seen driving national heating degree days (HDD) to 20-30% greater than normal.

“But again, this late in the season, HDDs just won’t drive as much demand compared to core winter, and where we believe the natural gas markets would prefer hotter trends over colder trends to suggest summer heat will arrive early,” NatGasWeather said.

Energy Information Administration Weekly Storage Report

The U.S. Energy Information Administration (EIA) reported on Thursday that domestic supplies of natural gas rose by 15 billion cubic feet (Bcf) for the week ended April 23.

Total stocks now stand at 1.898 trillion cubic feet (Tcf), down 302 Bcf from a year ago and 40 Bcf below the five-year average, the government said.

Daily Forecast

The initial reaction to last week’s EIA report was bearish based on the fact that prices fell, but was it really bearish or did longs use the report as an excuse to book profits following a steep rally earlier in the week?

Natural Gas Intelligence (NGI) argues that what the market’s reaction to the EIA figure failed to illustrate was that the 15 Bcf injection resulted in a substantial expansion of year/year deficit. The build also flipped the five-year average to a 40 Bcf shortfall.

“It is first important to highlight the fact that the 15 Bcf build was the smallest build in the past 20 years for the third week of April,” said Mobius Risk Group. “Willingness to overlook this historically small build, and the 51 Bcf shortfall compared to the same week last year, was surprising.”

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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.