With hot temperatures in the current week expected to fade after the weekend, natural gas futures lost ground in early trading Tuesday. As of around 8:50 a.m. ET, the September contract was down 3.2 cents to $3.913/MMBtu.
The market struggled to find direction in Monday’s session despite sizable gains in projected cooling degree days (CDD) in recent forecasts, analysts at EBW Analytics Group said.
“Early in the day yesterday, futures raced higher,” the EBW analysts said. “The September contract, however, quickly met resistance at $3.938 and then fell to $3.857 — just a few ticks above last Friday’s close.
“Unlike on Friday, however, futures were able to rally again in the afternoon, with the September contract closing near its high for the day.”
In terms of the latest forecast outlook early Tuesday, NatGasWeather observed little change from the American Global Forecast System overnight. However, the European model shed 3 CDD from its projections but still remained hotter than its American counterpart.
“Both still forecast national demand fading to more seasonal levels next week and beyond” after a stretch of “quite strong” demand for the remainder of the current week and through the weekend, NatGasWeather said. “What also needs close monitoring are several tropical disturbances that have the potential to strengthen and threaten the U.S. with rain and wind late this weekend and early next week.”
Models favor “rather comfortable” temperatures in the 11- to 15-day time frame extending into days 16 through 20 of the outlook period, according to the firm. This suggests that “after this weekend, the pattern won’t be quite hot enough to intimidate going forward.”
EBW analysts characterized market signals early Tuesday as “mainly bullish” despite weakness in liquefied natural gas feed gas demand.
“Natural gas production is down sharply, primarily due to maintenance issues in the Northeast that could continue to depress flows through the end of the month,” the EBW analysts said. “A test of resistance at $3.97-4.04 is possible. With the end of summer nearing, though, bears could beat prices back down at any time.”
Meanwhile, should recent struggles for European natural gas benchmarks continue then Henry Hub could “easily get dragged lower as well,” according to ICAP Technical Analysis analyst Brian LaRose.
In terms of the technicals, for the bulls to avoid “further downside” for the soon-to-be-prompt-month October contract, they will need to “promptly lift” prices above $4.205/4.211, LaRose said. “Still see the potential for a push to the $4.386 vicinity, perhaps higher, if the bulls can make that happen.”
October crude oil futures were up 75 cents to $66.39/bbl at around 8:50 a.m. ET.
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August 24, 2021 at 08:09PM
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Summer Heat Seen Fading Soon as Natural Gas Futures Slide Early - Natural Gas Intelligence
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