The key support area on the daily chart is $2.885 to $2.848. This zone also represents value so a break into this area could bring in speculative buyers. If there is going to be another rally then it’s likely to start on a test of this zone.
Natural gas futures are trading lower early Monday which means investors are pricing in milder temperatures this week than originally forecast. Traders could also be expressing concerns over rising production.
At 0717 GMT, August Natural Gas is trading $2.917, down $0.028 or -0.95%.
The current weather forecasts call for cooler temps at the start of the week in key demand areas throughout the Midwest and parts of the East then the return of heat later in the week. Therefore, overall demand is expected to be moderate to increasingly high.
Today’s early price action suggests investors want further confirmation that temperatures will heat up after July 1. This data may not be made available until Monday or Tuesday afternoon. Until then, the short-selling hedgers appear to be taking control. Any mention of renewed heat, or lingering heat during the first two weeks of July will force these shorts out of the market, and could even encourage some speculative buying.
Currently, the supply deficit is 27.4% lower than levels at this time a year ago, and about 19.9% below the five-year average for this time of year. This is why the market has been so sensitive to the weather forecasts.
Forecast
The key support area on the daily chart is $2.885 to $2.848. This zone also represents value so a break into this area could bring in speculative buyers. If there is going to be another rally then it’s likely to start on a test of this zone.
Until the new 6 – 10 day weather forecasts are released, we have to assume that prices will continue to retreat until they hit the support zone at $2.885 to $2.848. Trader reaction to this zone will set the tone for the day, and perhaps the week.
