Natural Gas Price Fundamental Daily Forecast – Needs to Hold $2.249 to $2.222 or New Lows Likely Over Near-Term

Natural gas prices are down sharply on Monday after weekend heat didn’t come in as expected and new forecasts indicate more seasonal temperatures over the near-term. Late last week, aggressive speculative buyers were betting on more impressive heat in several key areas over a longer period of time, however, the price action indicates that this scenario is unlikely.

At 12:04 GMT, August natural gas is trading $2.267, down $0.040 or -1.73%.

Natural gas futures posted a strong performance last week, but there were no signs of real buying. The relatively impressive rally was primarily fueled by short-covering due to a surprise in this week’s government storage report and position-squaring because of extremely oversold technical conditions.

Bullish traders are hoping for the El Nino weather effect to weaken so that the expected heat during the first week of July will linger in key demand areas. Bearish traders were not impressed by the short-term forecasts. Furthermore, their conviction is also being driven by rising production and weak cash markets.

Short-Term (6 to 10 Day) Weather Forecast

According to NatGasWeather for July 1 to July 7, “A quick cool shot will race across the Northeast through Monday, then warming into the mid-80s to near 90 the rest of the week. A weather system will cool portions of Texas and the South into the upper 80s, otherwise the Southwest will be in the 100s and the Southeast in the mid-90s. It will also be hot up the Mid-Atlantic Coast with mid-90s, even reaching 90s for New York City late week. The Northwest & North Plains will be mostly comfortable with highs of upper 70s to mid-80s. Overall, demand will be increasing to high due to greater coverage of highs in the upper 80s and 90s.”

U.S. Energy Information Administration Weekly Storage Report

On June 27 the EIA reported a 98 Bcf injection into storage inventories for the week-ending June 21. The build came within expectations, but fell well below the 104 Bcf consensus. Besides being the lightest injection of the summer so far, it also broke a streak of seven consecutive triple-digit injections. The build was also above last year’s 71 Bcf injection and the five-year 70 Bcf average.

Working gas in storage was 2,301 Bcf as of Friday, June 21, 2019, according to EIA estimates. This represents a net increase of 98 Bcf from the previous week. Stocks were 236 Bcf higher than last year at this time and 171 Bcf below the five-year average of 2.472 Bcf. At 2,301 Bcf, total working gas is within the five year historical range.

Daily Forecast

There’s heat in the forecast, but as long as El Nino is in effect, the heat is going to have a hard time locking in.

The key area to watch is $2.274 to $2.222. Speculative buyers may come in on a test of this area in an effort to form a potentially bullish secondary higher bottom.

Looking ahead to this week’s EIA report, traders are looking for a build of about 98 Bcf.