Natural Gas Price Fundamental Weekly Forecast – Bracing for String of Triple Digit Builds Amid Improving Weather Conditions

Natural gas bulls hung in there as long as they could last week, shrugging off a higher-than-expected government storage report, before finally succumbing to forecasts calling for milder temperatures into mid-May and expectations of several more triple-digit storage builds before the summer cooling season begins. Spot gas prices also retreated as current weather conditions reduced demand for product.

Last week, June natural gas futures settled at $2.567, down 0.013 or -0.50%.

For much of the week, prices held steady near a technical resistance level at $2.623, even touching as high as $2.626 before prices retreated into Friday’s close. The early strength came as  surprise to most traders with NatGasWeather saying prices firmed earlier in the week “seemingly for other reasons, making it difficult to know if support for prices will continue” at the start of the new week.

EBW Analytics Group CEO Andy Weissman said, “Recent price action in the futures market points to a combination of bullish sentiment by ‘strongly bearish’ fundamentals.”

“The natural gas market continues to act as if it wants to move higher, with the June contract selling off only modestly despite a massive 123 Bcf injection” from weekly government storage data, a figure “far above market expectations or any previous April injection,” Weissman said.

At times last week, it did look like there was real buying in the market as opposed to short-covering, but we’re not going to know for sure until we see trader reaction to a short-term support area at $2.552 to $2.534. If buyers come in to support the market on a pullback into this area, then look for a secondary higher bottom to drive prices back toward $2.623 to $2.626.

As Weissman puts it, “The bullish sentiment could help the front month hold support early in the upcoming week though the prospect of demand falling to ‘rock bottom levels” further into May paints a ‘bleak’ picture for bull.”

Weekly Forecast

So here is the situation at the start of the week. Low demand expected as well as another triple-digit inventory build. This is potentially bearish, but don’t tell that to the current bulls. The recent price action has been showing respect for a pair of technical 50% levels at $2.552 and $2.623.

If the technical support zone at $2.552 to $2.534 begins to attract new buyers then we could see a retest of $2.623 to $2.626.

If $2.552 fails then look for the selling to extend into at least $2.534.

Once again weather forecasts, demand and potential technical support levels will control the price action. The fundamentals are bearish, but sentiment is still strong. The market will remain strong until the last counter-trend buyer is driven out of the long-side.