Natural Gas Price Fundamental Daily Forecast – Gains Being Capped by Technical Resistance, Rising Production

Natural gas futures are trading nearly flat shortly before the regular session opening after hitting the same technical resistance level for the fourth consecutive session. The market remains supported by forecasts calling for hot temperatures, but gains are being capped by a technical resistance level at $2.440 and rising production. Traders are also watching a weather system in the Gulf of Mexico which is encouraging energy companies to shut down oil rigs.

At 11:15 GMT, August natural gas is trading $2.427, up $0.002 or +0.08%.

Traders are continuing to react to the potentially bearish closing price reversal top chart pattern formed on Monday at $2.467. Taking out this level will negate the chart pattern and signal a resumption of the short-term rally. If it continues to exert downward pressure then $2.301 to $2.261 becomes the primary downside target.

Short-Term Weather Outlook

According to NatGasWeather for July 10-16, “The Southern US remains hot with highs of 90s from Texas to the Southeast, 100s over the Southwest. The exception will be along the Gulf Coast where a weather system will bring heavy showers and slight cooling, with the track inland over Texas early next week. The northern US will be very warm with highs of upper 80s to near 90 degrees Fahrenheit from Chicago to New York City, although cooling a few degrees late in the week as a weather system races through. The West will be very warm to hot besides the Northwest where showers will lead to minor cooling. Overall, national demand will be high.”

Production Concerns Capping Gains

Genscape said production set a new record daily high over the weekend. The analytics firm’s estimates showed Lower 48 production climbing to 90.5 Bcf/d on Saturday (July 6), with that figure staying above the 90 Bcf/d mark every day since Wednesday (July 3). Production over the weekend averaged 1.5 Bcf/d more than the prior 30-day average.

Daily Forecast

The key level to watch today is $2.440. Trader reaction to this level will set the tone for the day.

Look for an upside bias to develop on a sustained move over $2.440 with last week’s high at $2.467 the next likely target. Taking out this high will indicate the buying is getting stronger with the next target $2.512. This is a potential trigger point for an acceleration to the upside.

A failure to sustain a rally over $2.440 will signal the presence of sellers. The daily chart is wide open to the downside with the first target $2.360. If this minor bottom is taken out then look for the selling to potentially extend into $2.301.