Natural gas futures are trading higher early Monday. The rally is being fueled by follow-through buying related to Thursday’s bullish U.S. Energy Information Administration’s weekly storage report
and a friendly short-term weather outlook for several key demand areas. At 0732 GMT, September Natural Gas futures are trading $2.801, up $0.019 or +0.68%.
While last week’s EIA report may be underpinning natural gas prices, it’s the short-term weather forecast that is providing some of the upside momentum.
According to NatGasWeather.com for the period July 30 to August 5, “Weather systems with showers and thunderstorms will track across the Midwest and east-central U.S. this week with comfortable highs of 70s to lower 80s, including into portions of the southern U.S. for lighter demand. Hot upper high pressure continues to dominate the western and southern U.S. with highs of 90s to 110F, hottest from California to Texas for strong regional demand. Late next weekend, hot high pressure will expand across the eastern half of the country with 90s gaining ground for increasing national demand. Overall, demand will be high to moderate.”
Looking ahead to Thursday’s EIA report, the early estimate shows a 40 Bcf to 45 Bcf build for the week-ending July 27. Last year, the EIA recorded an 18 Bcf injection, and the five-year average is a build of 43 Bcf.
Technically, the main trend is up according to the daily chart. The price action suggests there may be enough upside momentum in the market to trigger a rally into a technical retracement zone at $2.831 to $2.869. We expect short-sellers to come in on a test of this zone.