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Natural Gas Price Fundamental Daily Forecast – Steady Ahead of New Weather Forecast, Storage Estimates

James Hyerczyk
Updated
The market could hold steady on Monday as we approach the May 7 bottom at $2.711. We may not see much action to the downside until the release of the next 10 to 14 day weather forecast and the first round of storage estimates for Thursday’s government report.

Natural gas futures are edging slightly higher early Monday. I wouldn’t read into the move. We could be just looking at profit-taking and position-squaring after the steep two-week sell-off. Technically oversold conditions could also be behind the early strength as well as bargain-hunters and bottom-pickers in front of the May 7 bottom at $2.711.

At 0538 GMT, September Natural Gas futures are trading $2.741, up $0.017 or +0.62%.

Despite the early strength, the market remains bearish because of record production and the return of more average temperatures.

According to NatGasWeather.com for July 13-19, “Hot pressure will dominate most of the country into early next week highs of upper 80s to 100s, hottest from California to Texas for strong demand. Weather systems with showers and cooling will sweep across the northern and east-central U.S. during the middle and end of next week with highs of 70s to lower 80s for lighter demand, while the rest of the country remains hot with highs of 90s and 100s including into the NW. With stronger cooling into the northern U.S. late next week, demand will then ease from high to moderate. “

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Last week, the Energy Information Administration’s (EIA) weekly natural gas storage report showed a miss to the low side of most estimates.

According to the EIA, producers injected 51 Bcf into Lower 48 gas stocks for the week-ended July 6, lower than the 59 Bcf injected last year and well-below the five-year average 77 Bcf build. Going into the report, major surveys showed traders were looking for a build of about 56 Bcf.

Reuters was looking for a build of 56 Bcf, with a range of 47 Bcf to 67 Bcf. Bloomberg called for a median 55 Bcf injection, with a range of 34 Bcf to 67 Bcf. The ICE EIA Financial Weekly Index futures contract had settled at 49 Bcf on Wednesday. Bespoke Weather Services was predicting a 54 Bcf build.

The EIA report also showed that total working gas in underground storage stood at 2,203 Bcf as of July 6, versus 2,928 Bcf a year ago and five-year average inventories of 2,722 Bcf. Week/week the year-on-year deficit widened from minus 717 Bcf to minus 725 Bcf, while the year-on-five-year deficit increased from minus 493 Bcf to minus 519 Bcf, EIA data show.

In other news, according to data from Baker Hughes, Inc., U.S. producers added two natural gas rigs during the week-ended July 13. The total number of domestic natural gas rigs finished the week at 189, roughly in line with 187 rigs running a year ago.

Forecast

The market could hold steady on Monday as we approach the May 7 bottom at $2.711. We may not see much action to the downside until the release of the next 10 to 14 day weather forecast and the first round of storage estimates for Thursday’s government report.

This article was originally posted on FX Empire

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