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Natural Gas Price Fundamental Daily Forecast – Aggressive Short-Sellers Trying to Drive Out Lingering Longs

James Hyerczyk

Natural gas futures are trading lower on Friday as traders express disappointment in yesterday’s government storage report that came out neutral, essentially making it a non-event. The price action suggests that a few aggressive counter-trend traders were sticking around for the report and have decided to bailout of their risky positions.

At 10:59 GMT, October natural gas futures are trading $2.156, down $0.007 or -0.32%.

Lower spot prices continue to put a lid on the futures market and may actually be behind today’s early weakness. Sellers are responding to the cooler temperatures sweeping the nation.

U.S. Energy Information Administration Weekly Storage Report

The EIA reported on Thursday at 14:30 GMT that domestic supplies of natural gas rose by 59 billion cubic feet for the week-ended August 16. Analysts were looking for an increase of 61 billion cubic feet. Total stocks now stand at 2.797 trillion cubic feet, up 369 billion cubic feet from a year ago, but 103 billion below the five-year average, the government said.

Broken down by region, the Midwest injected 31 Bcf, while the East added 26 Bcf. Small builds were seen in the Mountain and Pacific region, and the South Central posted a net 4 Bcf withdrawal after salt facilities withdrew 9 Bcf and nonsalts injected 5 Bcf, according to EIA.

Short-Term Weather Outlook

According to NatGasWeather for August 22 to August 28, “Strong high pressure will dominate the western and southern US with highs of 90s to 100s, hottest from California to Texas for strong demand. High pressure will continue across the East today with highs again warming into the upper 80s to near 90 Fahrenheit as far north as New York City, then cooling Friday through the weekend as a weather system brings showers with highs of only 70s to lower 80s. A brief warm up is expected over the southern and eastern US early next week for a bump in national demand, followed by additional weather systems with cooling. Overall, national demand will be high today then easing to moderate through next week.

Daily October Natural Gas

Daily Forecast

The EIA report, forecasts calling for lower temperatures and the drop in spot prices should be enough to weigh on prices today. Holding up the market on the daily chart is $2.132. Keeping a lid on prices is $2.226.

If this week’s downside momentum continues to build then look for sellers to try to drive the market through $2.132. This could trigger sell stops and aggressive long liquidation down to the contract low at $2.045.

It all depends on whether the short-sellers want to squeeze as much profit out of this market before the end of the month.

This article was originally posted on FX Empire