Sellers hit natural gas futures hard early Monday, triggering a gap-lower opening. The downside momentum created by the move has put the market in a position to take out last week’s low. If the selling pressure continues to increase then the July 5 and November 10 bottoms will become the next major targets. End-of-the-month position-squaring may have also been behind the selling.
At 0530 GMT, September Natural Gas futures are trading $2.878, down $0.063 or -2.14%.
The selling is likely related to the weather forecast and above-average supply.
Steady, near-normal temperatures and cooling demand over the next two weeks could lead to a lower to sideways trade this week. The early trade suggests sellers are in control, but if buyers come in to defend the two bottoms at $2.830 and $2.800, then natural gas could become rangebound.
Meteorologists forecast temperatures during the month of August to be near normal after a warmer-than-average June and July.
According to natgasweather.com, for the week-ending July 28 to August 4, “A fresh weather system with heavy showers and cooling will sweep across the South Great Lakes and Northeast today, then down the East Coast this weekend into early next week.”
“This system will finally be steered over the South during the middle of next week while weakening. Over the west-central U.S. hot high pressure will continue to dominate with highs of upper 80s to 100s for regionally strong demand.”
“Overall, natural gas demand will be moderate.”
Forecast
Looking ahead to Thursday’s U.S. Energy Information Administration’s weekly inventories report, analysts are expecting a 31 billion cubic feet injection into storage during the week-ending July 28, leaving inventories about 3 percent above normal for this time of year.
This figure compares with a 3 bcf withdrawal during the same week a year earlier and a five-year average build of 44 bcf.
Research firm Thompson Reuters is projecting U.S. gas consumption will slide to 76.0 billion cubic feet per day (bcfd) this week from 78.2 bcfd last week as the weather moderates and air conditioning demand eases before edging up to 76.7 bcfd in two weeks when temperatures are expected to rise a little.
U.S. exports are also expected to average 8.3 bcfd this week.
To recap last week’s news, according to the U.S. Energy Information Administration, natural gas storage in the U.S. rose by 17 billion cubic feet in the week-ended July 21, below forecasts for a build of 24 billion. That compared with a gain of 28 billion feet in the previous week, an increase of 17 billion a year earlier and a five-year average rise of 47 billion cubic feet.