Natural Gas Price Fundamental Daily Forecast – Heat in Forecast, but Will It Last?

Natural gas is inching lower early Tuesday after a change in a short-term weather report fueled a huge short-covering rally. The move didn’t take out any important tops, but it did send a signal to traders just how fast this market could turn on a weather scare.

There has been no follow-through to the upside early in the session. The market is straddling a short-term 50% level. The short-term range is $2.413 to $2.134. Its 50% level or pivot at $2.274 is controlling the short-term direction of the market.

The main trend is down. The trend will change to up on a trade through $2.413. However, a retracement zone at $2.440 to $2.512 could stop any attempt to breakout to the upside. A move through $2.134 will signal a resumption of the downtrend.

At 09:00 GMT, August natural gas is trading $2.272, down $0.012 or -0.53%.

Hotter Forecast for First Week of July

Prices surged on Monday as weak short-sellers scrambled to cover positions after Bespoke Weather Services shifted its forecast hotter for the first week of July. Gains were likely limited because the weather service also added that trends in the models were mixed over the weekend.

Radiant Solutions also put heat across the Midwest and East in its latest six- to 10-day forecast. Its latest 11-15 day forecast trended hotter in the Mid-Atlantic and Southeast and cooler in the Northeast.

Short-Term Weather Outlook

According to NatGasWeather for June 24-30, “Several weak weather systems will bring showers and thunderstorms across the northern and east-central US the next several days. Temperatures will be mostly comfortable across the northern US to open the week with highs of upper 60s to 80s although warming during the second half of the week into the 80s to locally 90s. The southern half of the US will be very warm to hot with highs of 90s besides 100s over the Southwest, although with scattered showers over the South & Southeast. Overall, demand will be slightly lighter than normal early in the week but increasing late in the week as the northern US warms to near 90 degrees Fahrenheit.”

Daily Forecast

Traders responded to the mention of heat in the forecast and the weak shorts were taken out. This was a normal move. In order to drive the stronger shorts out of the market, the forecasts are going to have to show lingering heat or heat domes over wider areas.

At this time, the forecasts for heat are short-term and they are scattered.

A sustained move over $2.274 will indicate the buying is getting stronger, but major resistance stands in the way at $2.440 to $2.512. Short sellers are likely to refresh on a test of this zone unless long-term high temperatures are put into the forecast.