Natural Gas News: Futures Edge Up Pre-EIA Report, Bearish Fundamentals Loom

Natural Gas Futures Edge Higher Ahead of EIA Storage Report

U.S. natural gas futures are showing slight gains as traders anticipate the release of the weekly Energy Information Administration (EIA) storage report. The market is attempting to stabilize above Tuesday’s closing price reversal bottom of $1.991, which could potentially trigger a short-covering rally if sustained.

At 12:51 GMT, Natural Gas futures are trading $2.078, up $0.042 or +2.06%.

Market Fundamentals Remain Bearish

Despite the possibility of a technical rebound, the underlying fundamentals continue to exert downward pressure on prices. Production levels remain robust, holding above 102 Bcf/d, contributing to ongoing supply surpluses. This oversupply situation has been a key factor in suppressing natural gas prices throughout July.

Weather Patterns and Demand Outlook

NatGasWeather reports that hot high-pressure systems are expected to dominate most of the U.S. from August 1-7, with temperatures ranging from the upper 80s to 100s. This weather pattern is likely to drive very strong national demand. However, the Upper Great Lakes region may see cooler temperatures with highs in the 70s to 80s due to incoming weather systems.

EIA Storage Report Expectations

Analysts’ predictions for today’s EIA storage report vary, with estimates ranging from a 30 to 34 Bcf injection. The most notable forecast stands at +30 Bcf, which aligns with market expectations. This projected build is slightly smaller than the five-year average of +33 Bcf. The previous week saw cooler-than-normal temperatures across the eastern half to two-thirds of the U.S., while the West experienced hotter-than-normal conditions.

Market Forecast

The short-term outlook for natural gas futures remains cautiously bearish. While the potential for a technical rebound exists, the persistent oversupply concerns and strong production levels continue to weigh on prices. Traders will closely monitor the EIA storage report for any surprises that could shift market sentiment. Barring any significant bullish catalysts, the path of least resistance appears to be downward in the near term.

Technical Analysis

Tuesday’s closing price reversal bottom at $1.991 remains intact, giving some hope to the counter-trend bulls. Overtaking $2.153 will confirm the short-term bottom, at least temporarily. This could fuel a near-term rally into the minor top at $2.315.

A failure to hold $1.991 could trigger a near-term break to at least $1.907.