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Natural Gas Price Fundamental Daily Forecast – Western States Sizzle, While Weekend Heat Returns to East

James Hyerczyk
·3 mins read

The relentless natural gas market is trading higher early Tuesday after posting a potentially bearish chart pattern the previous session. The lack of follow-through to the downside may be spooking weaker shorts into covering their positions. If the upside momentum created by the move is strong enough to take out Monday’s high at $2.525 then we could see an acceleration to the upside with the May 5 top at $2.588 the next likely upside target.

At 10:17 GMT, October natural gas futures are trading $2.500, up $0.024 or +0.97%.

Even if there were a short-term pullback, sellers would have to take out $2.228 to change the main trend to down so the market seems to be well supported.

On the fundamental side, a potentially bullish report from the Energy Information Administration (EIA) released on Monday, may be providing support.

EIA Sees Production Downtrend Continuing

Natural gas production from seven key U.S. onshore facilities is set to decline in September, continuing a downtrend that began earlier this year, according to the latest Drilling Productivity Report (DPR) published Monday by the EIA.

The EIA expects natural gas production from the Anadarko, Appalachian, Denver Julesburg-Niobrara and Permian basins, as well as from Bakken, Eagle Ford and Haynesville shales, to decline by 421 MMcf/d month/month, hovering at just over 79.2 Bcf/d, according to the agency.

Five of the seven plays are expected to post natural gas production declines in September, with EIA’s projections showing the Anadarko down 126 MMcf/d, Appalachia down 203 MMcf/d, the Eagle Ford down 56 MMcf/d, the Haynesville down 62 MMcf/d and the Denver Julesburg-Niobrara down 14 MMcf/d.

While the majority of plays are expected to show declines, the Bakken and Permian are projected to increase output from August to September, according to the EIA. Bakken gas production is expected to rise by 15 MMcf/d and Permian is expected to also grow by 25 MMcf/d.

Short-Term Weather Outlook

According to NatGasWeather, “Hot conditions continue across the western and southern U.S. with highs of 90s and 100s, hottest in California and the Southwest. Weather systems with showers and comfortable highs of 70s to 80s will bring light demand to the Midwest, Mid-Atlantic, and Northeast.

Warmer temperatures will gain coverage over the eastern half of the U.S. this weekend into early next week with highs of lower 90s returning across the East Coast.

Overall, strong demand in the western half of the U.S. and moderate for the eastern half. “

Daily Forecast

Keep an eye on the spot market with sizzling temperatures in California and into the interior Pacific Northwest driving extensive cash price gains across the West on Monday, with local utilities and power grid operators struggling to keep pace with demand.

The National Weather Service (NWS) said a strong ridge of high pressure aloft was expected to reach peak intensity Monday, driving record heat across the western United States. Actual high temperatures were forecast to soar well past the century mark for the hottest locations in the interior Pacific Northwest, while temperatures in some areas of the Desert Southwest were to exceed 120 degrees.

The strong ridge is expected to weaken starting Tuesday, but only moderately. This could start to put pressure on spot prices, which could drag down national prices.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire