Natural Gas Price Fundamental Daily Forecast – Bearish Under $2.971, Bullish Over $3.011

Natural gas futures weakened on Thursday after weekly government storage data increased more than forecast last week.

October Natural Gas future settled at $2.981, down 0.019 or -0.63%.

According to the U.S. Energy Information Administration, storage in the U.S. rose by 65 billion cubic feet (bcf) in the week-ended September 1, slightly above the top end of the forecast at 64 bcf.

This new data compared with a gain of 30 bcf during the week-ended August 25, a build of 36 billion for the same time period in 2016 and a five-year average rise of 58 bcf.

The EIA report also showed that total natural gas in storage currently stands at 3.220 trillion cubic feet. This is around 6.2% lower than levels at this time a year ago and mostly in line with the five-year average for this time of year.

Forecast

The price action this week suggests that traders are still trying to get a grip on the storage data in the wake of the hurricane and heavy flooding in the Texas Gulf Coast area.

Currently, investors are dealing with the potential impact of Hurricane Irma as it heads towards Florida. Production is not going to be affected, but demand will.

Traders will be monitoring the path of the storm because if it moves up the east coast of Florida, it could hit two South Florida nuclear power plants that lie in Irma’s path.

It’s a complex situation in Florida so we may have to wait until we see where the storm makes contact with the state before announcing its impact on natural gas. The electrical power plants use natural gas for fuel as well as nuclear power.

The power plant where electricity is produced uses boilers or other equipment to convert fuel to energy. The energy is used to turn a turbine, which then spins the generator motor to produce electricity. The fuel converted to energy is either natural gas or nuclear power.

It the nuclear plant shuts down during the storm then natural gas demand could increase. However, depending where the storm hits the state, there is likely to be low demand for electricity due to power outages. At this time, it’s difficult to predict how this situation is going to unfold.

When in doubt, turn to the chart. The chart suggests the market will be in a weak position on a sustained move under $2.971 and in a strong position on a sustained move over $3.011.