Natural Gas Price Fundamental Daily Forecast – Sustained Move Under $2.368 Targets $2.185

Natural gas futures are trading lower on Monday shortly after the regular session opening and on the weak side of a key technical support level, putting it in a bearish position. Sellers are still reacting to last week’s surprisingly larger-than-expected government inventory report and fresh concerns over supply growth. In addition, there is pressure from the October rollover into the November futures contract and deep discounts on spot market deals despite forecasts calling for unseasonable heat over the short-run and an early cold snap in the Northwest.

At 14:42 GMT, November natural gas futures are trading $2.338, down $0.065 or -2.70%.

Short-Term Weather Outlook

According to NatGasWeather for September 30 to October 5:  Unseasonably strong high pressure will dominate the southern and eastern US the next several days with very warm to hot highs of 80s to 90s. It will be hottest from Texas to the Southeast for relatively strong late season demand. Chilly temperatures have arrived across much of the West with lows dropping into the 20s to 40s for modest early season heating demand. Fresh cooling will spread across the northern US late in the week with lows of 30s and 40s including into the Northeast. Overall, stronger national demand this week versus last week due to a stronger mix of heating and cooling needs.

U.S. Energy Information Administration Weekly Storage Report

Last Thursday, the U.S. Energy Information Administration (EIA) reported a larger-than-expected weekly injection into U.S. natural gas stocks, topping even the highest estimates.

The EIA reported that domestic supplies of natural gas rose by 102 billion cubic feet for the week ended September 20.

Traders were looking for the EIA report to show an injection in the upper 80s or low 90s Bcf for the week-ending September 20.

A year ago the EIA reported a 51 Bcf build. The five-year average is a 74 Bcf injection.

Total stocks now stand at 3.205 trillion cubic feet, up 444 billion cubic feet from a year ago, but 47 billion below the five-year average, the government said.

Daily Forecast

Fundamentally, rising production levels are probably the biggest concern for bullish traders.

EBW Analytics Group said, “The ‘startling’ injection figures from EIA Thursday could signal gaps in the market’s read on production volumes.

“A single major storage miss is often an anomaly,” EBW analysts said. “The recent pattern suggests, however, that production is running substantially higher than published estimates. This may be due to completion of new intrastate lines and gathering systems, and the return of pipelines from fall maintenance and forced outages.”

The means the next two or three EIA reports “will be critical to gauge whether production estimates should be raised and, if so, by how much.”

Technically, the main trend is down according to the daily swing chart. Earlier today, November natural gas futures crossed to the weak side of the retracement zone at $2.440 to $2.368. This puts the market in a bearish position.

Furthermore, the market is now in a position to accelerate to the downside with $2.185 the next major downside target.

Closing higher today or recapturing $2.368 will signal the buying is greater than the selling at current price levels, however, this may only lead to a short-covering rally that sets up the next shorting opportunity.