Natural Gas Price Fundamental Daily Forecast – Hot Forecasts May Encourage Traders to Fade Bearish EIA Report

Natural gas is trading nearly flat on Thursday shortly before the regular session opening and the release of the government’s weekly storage report at 14:30 GMT.

Prices fell early in the session on Wednesday on concerns over LNG exports and as fresh weather forecasts failed to impress. The market plunged to a new contract low at $1.674 but aggressive speculators pounced on the price, triggering an intraday short-covering rally that turned the market higher for the session.

At 11:06 GMT, July natural gas futures are trading $1.782, up $0.002 or +0.11%.

Speculators were likely attracted to the relatively low price and the prospect of summer cooling demand. However, despite the potentially bullish chart pattern, bearish traders are likely waiting to sell any follow-through rally due to worries over low COVID-related demand and rising supply.

US Energy Information Administration Weekly Storage Report

On the storage front, Natural Gas Intelligence (NGI) reported that EBW Analytics said Thursday’s report from the EIA “could be important” since it may provide “more insight into how the supply/demand balance is shifting at a time when supply and demand are both in flux.”

NGI also said that “A lower-than-expected build for the week ended June 5 could signal increased industrial demand for factories formerly idled amid the pandemic reopen and drive power usage.”

A Bloomberg poll of nine analysts found injection estimates ranging from 91 Bcf to 99 Bcf, with a median of 94 Bcf, on par with the five-year average. A Wall Street Journal survey produced an average of 93 Bcf injection. NGI estimated a 96 Bcf build.

Last year, the EIA recorded a 107 Bcf increase in storage for the similar week.

Short-Term Weather Outlook

The latest forecasts are calling for a relatively hot June and expectations that rising temperatures will drive seasonally robust energy demand to power air conditioners.

“We see a little more heat in today’s medium-range forecast,” said Bespoke Weather Services, noting that models showed higher temperatures taking hold next week.

Bespoke expects a cooler period Friday through Tuesday in the eastern United States before more heat returns in the middle of next week, increasing the likelihood of greater gas-weighted degree day (GWDD) totals for June overall. The current month is “on pace to rival 2018 and 2016 for the highest June GWDD count since June 2011,” and that is “notable given the tendency for hotter summers over the last 10 to 15 years.”

Daily Forecast

With prices so low, I don’t think a bearish EIA report will do too much damage. However, a bullish number combined with the possibility of increased demand due to the return of hot temperatures could drive prices higher into the close.

For a look at all of today’s economic events, check out our economic calendar.