Natural Gas Price Fundamental Daily Forecast – Above Average Temps Providing Support
Natural gas futures posted a volatile two-sided trade on Monday before forming a potentially bullish closing price reversal bottom. The buying came in at $2.695 as investors successfully defended the last main bottom at $2.691.
June Natural Gas futures settled the session at $2.741, up $0.030 or +1.09%.
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The wicked price action was fueled by bearish investors banking on increased production and low demand, and bullish investors who feel the market will have trouble building up gas in storage.
Forecast
As I said in my weekly analysis, the focus will be on weather this week. Traders know supply is low for this time of year and they know that there will be production. What they aren’t sure about is the short-term demand and this will be determined by the weather.
If we have an average spring then there is a chance the gas in storage will be much higher than it currently is before the hot summer weather arrives.
If the spring is too hot, or if the cooler temps return then production is going to have to be ramped up in order to meet the unexpected demand. If production falls short then the summer cooling season will likely begin with storage at low levels. This should be bullish for prices.
Nat gas prices may have started the week on the upside because of updated forecasting models that pointed to above-average temperatures covering most of the country over the next two weeks. This should be enough to boost late spring/early summer demand for natural gas.
Looking ahead to Thursday’s U.S. Energy Information Administration’s weekly storage report, traders expect to see an increase of about 89 billion cubic feet (bcf) for the week ended May 4. That compares with a build of 62 bcf in the preceding week, an increase of 45 bcf a year earlier and a five-year average of 75 bcf.
Total natural gas in storage currently stands at 1.343 trillion cubic feet (tcf), according to the EIA. That figure is 903 bcf, or around 40.2%, lower than levels at this time a year ago, and 534 bcf, or roughly 28.4%, below the five-year average for this time of year.