Natural Gas Price Fundamental Weekly Forecast – Could Retreat to $3.691-$3.568 as Buyers Await Next Heat Wave

Natural gas futures finished lower last week as hopes for a lingering late summer heat-wave faded quickly after soaring East and West coast temperatures had lifted prices to multi-year highs. Following an initial surge at the start of the week, prices trended lower into Friday’s close ahead of a major weekend cooldown.

Last week, October natural gas futures settled at $3.875, down $0.279 or -6.72%.

Energy Information Administration Weekly Storage Report

The U.S. Energy Information Administration reported on Thursday that domestic supplies of natural gas rose by 49 billion cubic feet for the week-ended August 6.

Analysts had expected the report to show a net injection in the upper 40’s range with a consensus of 47. This was up substantially from last week’s 13 Bcf build.

Last year, the EIA recorded a 55 Bcf build for the similar week, while the five-year average is an injection of 42 Bcf.

Total stocks now stand at 2.776 trillion cubic feet (TCF), down 548 Bcf from a year ago and 178 bcf below the five-year average, the government said.

Weekly Weather Forecast

According to NatGasWeather for August 16 to August 22, “Comfortable highs of 70s to 80s and showers will rule the Great Lakes and East Monday-Wednesday for light national demand. It remains hot over the West, Plains, and Texas with highs of upper 80s to 100s for regionally strong demand.

Weak tropical system Fred will bring rains to the Southeast the next few days, then track northward through the Mid-Atlantic and Northeast later in the week.

The Northwest will cool into the 70s and 80s as a weather system brings showers.

New Tropical Storm Grace could threaten the U.S. Gulf Coast late in the week with rain and wind. Overall, national demand will be moderate to high through late in the week, then high.

Weekly Forecast

Bespoke Weather Services said its model still indicate the gas market is on a path to less than 3.5 Tcf in storage at the end of the season, “which is not bearish.” However, the market may want to see some retightening before sustaining any push back higher on the pricing front.

Our work suggests that bullish traders may be looking for a value area to reenter on the long side after buying nearly every minor dip earlier in the summer. We have identified this value area as $3.691 to $3.568.

Once the market hits this zone, prices may consolidate until the next round of heat is confirmed. There are still some doubts as to when the next heat wave will start. NatGasWeather said models were at odds over how much warmth could return by the second half of this week.

The Global Forecast System was “still very warm” for the period, but then showed temperatures retreating again August 25-28. The European data, meanwhile, maintained the hotter pattern for late August.