Natural Gas Price Fundamental Weekly Forecast – Trader Reaction to $3.015 to $2.988 Will Set Tone for Week
Natural gas futures had a tumultuous week, first gapping higher to start the week then rallying sharply higher by mid-week before filling in the gap late in the week. Despite the volatility, the market still managed to eke out a gain for the week.
August Natural gas futures settled the week at $3.035, up $0.084 or +2.85%.
The price action was primarily driven by changes in the weather models. Early in the week, updated forecasting models pointed to increased summer demand in the week ahead. This news was enough to trigger a “gap and go” rally, but not enough to sustain the rally.
Technically, the rally was strong enough to take out a previous top at $3.102, but there weren’t enough buyers to drive the market through another main top at $3.127.
Sellers came in after the U.S. Energy Information Administration released its weekly inventories report on Thursday. The EIA report showed that domestic supplies of natural gas rose by 46 billion cubic feet for the week-ended June 23. This was actually below the 52 billion cubic feet estimate, but apparently it wasn’t bullish enough to sustain the rally.
Since the EIA report is stale data, the price action suggests that investors were already pricing in data from the week-ended June 30 and the future weather forecasts.
In other news, the EIA report also showed that total stocks now stand at 2.816 trillion cubic feet, down 319 billion cubic feet from a year ago, but 181 bcf above the five-year average.
Forecast
Let’s look at the chart first because price action along with the weather forecast will tell us if this market is going to move higher or lower.
Technically, the main trend is down on the weekly chart. However, last week’s price action did shift momentum to the upside.
The short-term range is $2.875 to $3.122. Its 50% to 61.8% retracement zone is $2.996 to $2.966. This is the key area that will determine whether the market moves higher or lower.
The retracement zone was tested on Friday. A sustained move over $2.996 will indicate the presence of buyers. They are trying to form a potentially bullish secondary higher bottom. A sustained move under $2.966 will signal the presence of sellers. They are going to try to shift momentum enough to the downside to lead to a test of the main bottom at $2.875. This move will also solidify $3.122 and $3.127 as resistance levels.
On the bullish side, if buyers can take out $3.127 then we could see a rally into $3.202 to $3.280.
Weather for June 30 to July 6
The new weather forecast supports lower prices early in the week then higher prices later in the week.
According to natgasweather.com, “Cooler than normal conditions will continue across the north-central U.S. into early next week as weather systems with showers result in comfortable highs of upper 60s and 70s. However, temperatures will warm back into the 80s to 90s over the East over the week-end as high pressure returns.”
“It remains hot over much of the West and the south-central US/Texas with highs in the upper 80s to 100s, which will expand to include much of the east-central U.S. this week as national demand increases to above normal levels.”
“Overall, natural gas demand will be increasing to high.”
This article was originally posted on FX Empire