Natural Gas Price Fundamental Daily Forecast – Underpinned by Forecasts Calling for Above-Average Temperatures
Natural gas futures rose on Wednesday on a warmer-than-average weather forecast. According to the National Weather Service, temperatures are expected to remain above-average throughout most of the country over the next six to 10 days.
The above-average temperatures are expected to continue through June which should lead to increased cooling demand. This, coupled with a slow storage build should continue to be supportive for prices.
Your capital is at risk
Production is forecast to stay relatively flat at 77.8 Bcf/d over the next two weeks. Prices could spike higher if demand exceeds production.
Today’s U.S. Energy Information Administration’s storage report is expected to show an 85 Bcf injection for the wee-ending June 15, down 11% from the 96 Bcf build the EIA estimated for the week-ending June 8, but largely in line with the five-year average build of 83 Bcf.
Current national stocks sit at 1.913 Tcf, a 21% deficit from the five-year average of 2.42 Tcf, according to EIA data.
The daily chart indicates the major support zone is $2.885 to $2.848. This zone held on Tuesday when sellers drove the market into $2.891. It is likely to be tested again if the weather services take the heat out of the forecast.
The short-term range is $3.043 to $2.891. Its retracement zone comes in at $2.967 to $2.985. This zone is currently being tested. Trader reaction to this zone should determine the near-term direction of the natural gas market.
A sustained move over $2.985 will indicate the buying is getting stronger. If this move generates enough upside momentum, we could see a spike into this week’s high at $3.043.
A sustained move under $2.967 will signal the presence of sellers. This will likely occur if today’s EIA report is bearish or the weather forecast changes to include a return to normal temperatures.
Look for volatility with the release of the EIA report at 1430 GMT. Watch for an upside bias to develop on a sustained move over $2.985 and for a downside bias to develop on a sustained move under 2.967.