Natural Gas Price Fundamental Daily Forecast – Extremely Oversold Conditions More Supportive than Hurricane Threat

Natural gas futures are inching lower on Tuesday, but posting an inside move. There has been no follow-through to the upside following yesterday’s impressive short-covering rally. Traders are saying there was nothing major in the news to trigger the move. However, cash prices in California jumped more than $1.00. Additionally, the Natural Gas Intelligence National Average climbed 13.5 cents to $1.935.

At 12:37 GMT, October natural gas futures are trading $2.213, down $0.020 or -0.90%.

The experts at NGI added the following, “On the futures front, the curve from the onset of Monday’s session, despite little change in overall weather forecasts and new highs for both production and liquefied natural gas (LNG) intake. Given that speculative traders had accumulated a record number of short positions in recent weeks, the sudden surge in prices is no surprise, but strong cash markets provided additional support.”

There you have it, extremely oversold conditions likely fueled the rally on Monday with investors highly sensitive to any bit of friendly news. We’ve said for weeks that shorts could crush this market and squeeze every drop of profit out of it if they wanted to, given the fundamentals. However, they don’t seem to be willing to press the market lower at current price levels, and may actually allow for a rally in order to short at better prices.

There was no talk of a hurricane triggering the short-covering rally either. NatGasWeather said forecasters continue to monitor a couple of tropical storms, one of the South Carolina coast that isn’t expected to impact the U.S. mainland. A second stronger cyclone, Dorian, is expected to tract toward the Caribbean this week, “but with much uncertainty if it will have the opportunity to impact U.S. interests after,” according to NatGasWeather.

 

Short-Term Weather Outlook

According to NatGasWeather for August 26 to September 2, “Comfortable conditions will continue across the Midwest, Northeast, and Mid-Atlantic regions as weather systems sweep through every few days with showers for light demand. The West into Texas will be hot with highs of 90s and 100s as high pressure dominates for strong regional demand. Some cooling will spread into portions of the South/Southeast Wednesday through Thursday, briefly cooling highs into the upper 80s. Overall, national demand will be moderate across the central and northern US but high over the West into Texas and the South.

Daily Forecast

The contrarians seem to be in control at this time due to extremely oversold conditions. So we could see another short-covering rally. Like I said yesterday, let’s just say the market could rally because everyone expects it to go down. It may have nothing to do with the fundamentals over the short-run.

On a personal note, I live on the Southwest Gulf Coast side of Florida. If a hurricane was coming, I’d be one of the first to know. Currently the tropical storm is still on the East side of the state and in the Atlantic Ocean. Furthermore, it hasn’t even formed into a hurricane. And it may not because it still has to pass over several islands and grow in size over the warm water in the Caribbean before it can become a hurricane. Additionally, if it does form, it may hit Miami. There are no natural gas platforms in the region.

The major natural gas platforms are at the top of Gulf of Mexico near Louisiana. Remember the storm earlier in the summer? That hit Louisiana and platforms were shut down as the storm passed.

Also keep in mind that when a hurricane hits southern Florida, natural gas demand tends to fall because we can’t live down here without air conditioning. Think:  No electricity. No air conditioning. No demand for gas to run the power plants.

Hurricanes that hit the Gulf of Mexico near Texas and Louisiana tend to drive up natural gas prices because that’s where the natural gas and crude oil platforms are.