Natural Gas Prices Rally Despite Storage Build
Today’s Spotlight Market
Lead month August Natural Gas futures posted a modest rebound following what was initially viewed as a ?bearish? Energy Information Administration (EIA) gas storage report. Last week, 91 billion cubic feet (bcf) of Gas was added to storage, which put total Gas inventories at 2.668 trillion cubic feet. The build was above pre-report estimates of an 87 bcf storage build. U.S. Gas inventories are now 33% above last year?s totals for this time period and 1.7% above the 5-year average. The rally in prices was attributed to short-covering buying following the report, as well as profit-taking by weak Gas bears in a market that had become short-term oversold.
Fundamentals
Natural Gas futures have been largely unaffected by the recent bout of market volatility, as bearish fundamentals including ample storage levels and expected growth in production have overshadowed global events in the eyes of Gas traders. As we head into the heart of the North American summer, Gas traders will be focusing on weather forecasts to see if summer heat will expand over the lower 48 states and spur increased demand for cooling and, in turn, power generation fueled by Natural Gas. The Climate Prediction Center in its latest 8- to 14-day forecast is calling for above to well above average temperatures from the Central and Southern Plains region and for most of the South East. However, in the major population centers of the Great Lakes and Northeast, the forecast is for normal to below normal temperatures, which will help to negate any increases in cooling demand from the center/southern portions of the nation. In its short-term energy outlook, the U.S. Energy Information Administration is forecasting U.S. Natural Gas production to increase by 5.7% in 2015, while usage is expected to rise by only 4.2%. If accurate, this will allow Gas supplies in storage to rise above the 5-year average and assure more than ample supplies as we head into the 2015-16 winter heating season.
Technical Notes? -? View Today’s Chart
Looking at the daily chart for August Natural Gas, we notice prices making a new 1-month low following the release of the EIA Gas inventory report. However, short-covering buying emerged from the recent lows, which set the stage for a mini-reversal. Prices are still holding below both the 20- and 200-day moving averages, so Gas bears are still holding the upper hand. The 14-day RSI has rebounded to a more neutral reading of 45.31. Thursday?s low of 2.644 is seen as support for the August futures, with resistance found at 2.885.
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