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Natural Gas Price Fundamental Daily Forecast – Bullish Weather Patterns Attracts New Buyers

Natural Gas Price Prediction – Prices Hit Fresh 2-month Highs

Natural gas is trading higher early Tuesday after posting a dramatic reversal the previous session. Although the market settled slightly lower the previous session, the price action serves as further proof that the battle lines between the bulls and bears have been drawn. The bulls do not seem to be worried about record production levels because they are banking on hotter weather forecasts for the end of August and early September to continue to drive up demand.

At 0829 GMT, October Natural Gas futures are trading $2.965, up $0.033 or +1.13%. More significantly, buyers seem to be willing to buy strength, which means they may attempt to trigger a breakout over last week’s high at $2.979.

The combination of new buying combined with buy stops could spike prices into the June tops at $2.995 and $3.025. This is significant because there are still two months left before the winter heating season begins.

Buyers are betting that increased demand will significantly dent the strong production enough to lead to smaller-than-average weekly storage injections. This will mean that the winter heating season will begin with a wider-than-expected supply gap.

Bullish Change in Weather Pattern

Yesterday’s rally began with the change in the forecast by NatGasWeather.com. Their latest weather data showed an upper high pressure system expanding to dominate most of the country except the far northern United States during the last week of August. There were earlier weather model differences, with the European model hotter than the rest, but the latest data showed the Global Forecasting System (GFS) model trending hotter to be more aligned with the European model.

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“Overall, the pattern is neutral to a touch bearish this week” because of the weather systems sweeping across the eastern half of the country, the weather forecaster said. Things turn “at least somewhat bullish the last several days of August into the first week of September” as stronger-than-normal high pressure sets up over the eastern two-thirds of the country, “suggesting hefty deficits should still not be expected to improve until after August, and likely not until mid-September,” NatGasWeather said.

The Fundamentals

Energy Information Administration Storage

According to the U.S. Energy Information Administration (EIA), U.S. natural gas in storage increased by 33 Bcf to 2.387 Tcf during the week-ended August 10. The build was slightly more than the consensus estimate for a 30 Bcf addition.

The injection fell well short of the 49 Bcf build reported during the corresponding week in 2017 and less than the five-year average addition of 56 Bcf, according to EIA data. Stocks were 687 Bcf, or 22% less than the year-ago level of 3.074 Tcf and 595 Bcf, or 20%, less than the 5-year average of 2.982 Tcf.

Production

Current data from S&P Global Platts Analytics show that dry gas production has averaged 78.2 Bcf/d thus far this year, which is 6.2 Bcf/d greater than this time last year. Platts went on to further say that it projects dry gas production to average 81.7 Bcf/d for the next two weeks.

Early EIA Report Estimate

The early EIA storage forecast for the week-ending August 17 shows a potential build of 48 Bcf. This would be 4 Bcf less than the five-year average.

This article was originally posted on FX Empire

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