Natural Gas Price Fundamental Daily Forecast – Low Demand Could Trigger Break Under $2.192

Natural gas futures are trading lower on Friday after traders failed to follow-through to the upside after yesterday’s higher close. Forecasts calling for cooler temperatures the first week of August continue to weigh on prices. The early price action suggests sellers may try to take out this week’s earlier low at $2.192.

At 09:52 GMT, September natural gas futures are trading $2.210, down $0.017 or -0.76%.

On Thursday, the U.S. Energy Information (EIA) weekly storage report failed to feed the bulls or the bears as it came in as expected. In the spot market, prices eased a little in the West and remained steady in the East.

U.S. Information Administration Weekly Storage Report

On Thursday, the EIA reported a 36 Bcf injection into U.S. natural gas storage for the week ended July 19. Prior to the release of the report, Bloomberg analysts forecast a median build of 37 Bcf. The Ice futures contract settled at 35 Bcf and Natural Gas Intelligence’s model predicted a 33 Bcf injection.

Last year, the EIA reported a 27 Bcf injection for the same time period. The five-year average build is 44 Bcf.

Total Lower 48 working gas in underground storage stood at 2,569 as of July 19, 300 Bcf (13.2%) higher than last year but 151 Bcf (minus 5.6%) lower than the five-year average, according to EIA.

Short-Term Weather Forecast

According to NatGasWeather for July 26 to August 1, “Cooler than normal conditions continue across the Midwest and Northeast today with highs of only 70s & 80s for one last day of light demand. Hot high pressure will rule the West & Plains with highs of upper 80s to 100s, hottest over the Southwest into West Texas. Temperatures will warm across the southern US, Midwest, and Mid-Atlantic Saturday through Tuesday with highs of upper 80s to 90s gaining for a modest bump in national demand. However, additional weather systems with showers and cooling are expected across the Midwest & East mid-next week. Overall, national demand will be increasing to high this weekend and then back to moderate mid-next week.”

Intermediate-Term Weather Forecast

According to Bespoke Weather Services, “On the weather side, some cooler momentum continued in the 11-15 day forecast period…We still feel that the pattern can ultimately remain biased hotter than normal for the balance of the summer season, but not without some variability mixing in. The cooling in the 11-15 day may be real given some rise in global angular momentum, but this could well be another short window of cooling before things return back hotter.”

Daily Technical Forecast

From a technical perspective, the market will remain bearish as long as it stays below this week’s high at $2.305. A move through this level will change the main trend to up. Even before buyers get a shot at this top, buyers will have to overtake retracement level resistance at $2.253 and $2.296.

Even if the trend changes to up, speculative buyers will have to claw through level at $2.344, $2.375 and $2.428. We don’t expect any serious damage to the longer-term bearish outlook unless buyers can overcome $2.476.

On the downside, taking out $2.192 will reaffirm the downtrend. This could lead to a test of this summer’s low at $2.115 over the near-term.