Natural Gas Price Fundamental Daily Forecast – Above-Average Temperatures Driving Up Demand

Natural gas is up for a fourth straight day early Friday with the market rapidly approaching its January 30 top at $3.010. The market is being underpinned by weather forecasts calling for hotter weather across most of the country. This is raising concerns that producers may have trouble filling the current supply deficit before the official start of the summer cooling season.

At 1115 GMT, July Natural Gas is trading $2.978, up 0.007 or +0.27%.

Prices advanced for a third straight session on Thursday after a government report came in below expectations.

On Thursday, the U.S. Energy information Administration reported that natural gas in storage in the U.S. increased by 91 billion cubic feet (Bcf) in the week-ended May 18. Traders were looking for a build of 93 billion.

The EIA data compared with a gain of 106 Bcf in the preceding week and represented a decline of 804 billion from a year earlier and was also 499 Bcf below the five-year average.

Total U.S. natural gas storage stood at 1.629 trillion cubic feet, 33.0% lower than levels at this time a year ago and also 23.4% below the five-year average for this time of year.

Forecast

Technical indicators show that the main trend is up and that momentum is trending higher. If this continues then we’re likely to see a test of $3.010 over the near-term. Due to the vertical price action, the only chart pattern that can stop the rally is a higher-high, lower-close. This chart pattern tends to indicate the selling is greater than the buying at current price levels, but not necessarily a change in trend.

Until new supply/demand figures are available, traders will remained focused on the weather forecasts. In its forecasts for May 24-30, the National Weather Service predicted above-average temperatures that would consolidate over most of the U.S. and continue into the following week. Most of the country will be experiencing hotter temperatures with the exception of parts of the Southeast.

NatGasWeather.com is forecasting for May 25 to May 30, “The central and southern U.S. will be very warm to hot with upper 80s to lower 100s, with the core of the heat over Texas. Next week will be warmer than normal across most of the country with highs of 70s and 80s north, and mid-80s to 100s over the southern U.S.”