Natural gas futures are trading slightly better shortly after the regular session opening and before the release of the weekly government storage report at 14:30 GMT. The market is also trading inside yesterday’s trading range, which tends to indicate investor indecision and impending volatility.
Today’s U.S. Energy Information Administration (EIA) natural gas storage report is expected to show a 77 Bcf build, down from last week’s 120 Bcf build.
NatGasWeather says, “Today’s EIA weekly storage report is expected to show a build of +74-79 Bcf by national survey averages, but with the most notable at +74 Bcf, slightly larger than the 5-year average of +65 Bcf. It was very warm to hot over most of the country besides the cooler central US/Plains. Our algorithm predicts a build of +68 Bcf.
We’re not looking for much of a reaction from the report unless there is a major miss in either direction. Instead, traders will be focusing on the weather.
Short-Term Weather Outlook
According to NatGasWeather for July 2 – July 8, “Upper high pressure will stretch from Texas to the Great Lakes and across the rest of the southern US with very warm to hot highs of upper 80s to 100s, hottest in the Southwest deserts.
Cooler exceptions continue across the Northwest and New England as weather systems stall with showers and highs of 60s and 70s locally light demand.
The Fourth of July weekend will remain very warm to hot over most of the U.S. with highs of upper-80s to 100s besides the far northwest and northeast corners. There will also be heavy showers over the Southeast this weekend, although still very warm & humid with highs of upper 80s to lower 90s.
Overall, national demand will be high.”
I don’t expect this EIA report to trigger a big reaction in the markets.
If there is a rally, it will be traders betting on a hot holiday weekend. If the market breaks then this will indicate traders have doubts about the heat continuing 10 to 15 days from now. If this occurs and the week-end is hotter than expected or the forecast changes, then we’ll see another price surge on Monday.
My short-term upside target zone is $1.785 to $1.848. My downside target zone is $1.651 to $1.619. This zone is important because aggressive counter-trend buyers could show up on a test of this zone in an effort to form a potentially bullish secondary higher bottom.