September natural gas futures were set to open Tuesday about 0.5 cents lower at around $2.792/MMBtu, with overnight forecasts maintaining hotter trends for August as strong production continues to apply downward pressure on the market.
“The overnight data was little changed to a touch cooler, but still held hotter trends for next week, favoring high pressure building across most of the country for strong demand,” NatGasWeather said. “The data had been a little cooler around Aug. 9, seeing a weather system into the Midwest and Northeast, although it has backed off in more recent data to mainly only impact the Northeast.”
NatGasWeather said it sees the pattern as “neutral to slightly bullish,” helped by hotter trends for the eastern half of the country over the weekend and into next.
“Bulls have gained recent momentum, although Lower 48 state production the past few days was reported to have returned to near record highs, which could have kept prices from making larger gains Monday,” the firm said. “Overall, the coming U.S. pattern through mid-August is likely to be viewed as just hot enough to keep deficits either near current levels of 550 Bcf or only marginally improving them, but remaining above 520 Bcf through the next four” Energy Information Administration storage reports.
As of Monday’s settlement, the September contract has gained 10.2 cents since July 23, including gains in six consecutive sessions, noted EBW Analytics Group CEO Andy Weissman.
“Futures are likely to struggle to make significant further gains today,” Weissman said. “With bears hoping for another steep increase when EIA releases its monthly production report later today, traders are likely to hold their fire until after the report is issued.
“Given the number of times natural gas has failed to break resistance this summer, continuing to move higher will not be easy,” he said. “If the weather forecast continues to trend hotter, though, we expect the September contract to test resistance at $2.86 before the end of the week.”
From a technical standpoint, unless the bears reassert themselves immediately natural gas could continue to grind higher, ICAP Technical Analysis analyst Brian LaRose said after Monday’s close.
“If the bears are going to have a shot at another round of fresh lows they must stand their ground right here, right now,” LaRose said. “Do just that and there is still a chance for a drop to the $2.642 vicinity. Fail to send natural gas lower from here and we would be prepared for the sideways to higher drift to continue as a more substantial retracement of the $3.053 to $2.704 decline unfolds.”
September crude oil was set to open about 37 cents lower at around $69.76/bbl, while August RBOB gasoline was trading fractionally lower at around $2.1540/gal.