Natural Gas Price Fundamental Daily Forecast – US Model Predicting Heat, European Pattern Not There Yet

Natural gas futures are inching lower on Wednesday after closing higher the last three sessions. The rally has been driven by technically oversold conditions, and short-covering attributed to forecasts for increased demand after June 18.

Even with the three-day recovery, there doesn’t seem to be an air of bullishness in the market. Traders still feel that rallies are actually selling opportunities at this time. Conditions aren’t likely to change until the heat intensifies, and there’s nothing in the near-term forecast to suggest that.

At 12:22 GMT, July natural gas is trading $2.394, down $0.005 or -0.21%.

Short-term Weather Outlook

According to NatGasWeather for June 12 to June 18, “A large weather system and associated cool front will sweep across the northern and central U.S. the next several days with highs of 60s to 70s. This system will also cool Texas, the South, and Southeast into the comfortable 80s, although warming back into the upper 80s to 90s late in the week. Strong high pressure will continue to bring heat across the West with highs of upper 80s to 100s for regionally strong demand. Overall, demand will be low.”

Daily Forecast

Although Thursday’s U.S. Energy Information Administration weekly storage report is in the way, traders are already looking at the weather forecasts after June 18. This is providing some light support. The impact of the forecasts could increase once the report becomes history.

There is a problem with conflicting weather forecasts, however, according to NatGasWeather. “The overnight weather data gained demand in all models after June 20^th expect the European models. The GFS model remained hotter with upper high pressure over the southern US and is now close to hot enough to finally end bearish weather headwinds and the impressive streak of larger vs normal builds if it were to prove true.”

“But the European model would also need to trend in that direction if the markets are to expect it. Until then, the pattern simply isn’t hot enough with the core of the nation’s heat over the West instead of across the South and East where conditions will be cooler than normal as a strong weather system and associated cool front tracks through.”

The chart pattern suggests we’re likely to remain rangebound until the US and European models confirm the same forecast.