Natural Gas Price Fundamental Daily Forecast – Steep Losses Possible if EIA Report Hits High End of Estimates

Natural gas futures are trading higher shortly after the cash market opening and ahead of the government’s weekly storage report. A successful test of a short-term technical support level may have triggered the intraday short-covering rally, or general uncertainty ahead of a report that could show the first triple-digit build of the year.

At 13:54 GMT, June natural gas is trading $1.978, up $0.034 or +1.75%.

US Energy Information Administration Weekly Storage Report

At 14:30 GMT, the EIA will release is weekly storage report for the week-ending May 1. Traders are looking for the first of many triple-digit injections this month, according to Natural Gas Intelligence.

A Bloomberg survey showed injection estimates ranging from 101 Bcf to 114 Bcf, with a median of 111 Bcf. A Reuters poll of 17 analysts had a wider range that included a low of 95 Bcf and produced a median injection of 106 Bcf. A Wall Street Journal poll’s results also averaged 106 Bcf, while Natural Gas Intelligence (NGI) projected a 109 Bcf build.

This compares with the 96 Bcf increase in storage recorded by the EIA in the same week last year and the five-year average build of 74 Bcf for that week.

Short-Term Weather Outlook

According to NatGasWeather for May 7 to May 13, “Weather systems with showers and cooling will sweep across the northern U.S. through mid-next week with lows of 20s to 40s, highs of 40s to 60s. Near ideal temperatures with highs of 70s to 80s will rule Texas, the South, and Southeast. The Southwest will be hot with 90 to 100, while mild to warm over the rest of the West with 60s to 80s. Overall, moderate heating demand North but light cooling demand in Texas, the South and Southeast.”

Daily Forecast

After spiking to a level not seen since January 17 earlier in the week, June natural gas futures have come back to earth, retracing 50% to 61.8% of the recent rally. The sell-off indicates that the major funds are not afraid to aggressively short the market even at the current extremely low levels.

EBW analysts said “bearish sentiment remains strong.” They further added, “It would not surprise us if one or more large funds has decided to aggressively short the market again, betting that” liquefied natural gas exports “will crater – driving injection-season prices much lower.”

If the EIA report comes in on the higher side of expectations, natural gas futures could continue lower today.