Forecast Natural Gas Fundamental Analysis

Natural gas eased a bit ahead of today’s inventory report to trade at 3.96 as temperatures remained warm but traders booked profits after the price was unable to break the $4 range. Several weather forecasts grew notably higher, causing the early buying, analysts said. Heat causes people to turn on air conditioning and use more gas-fired electricity, and the pattern developing for the weekend includes some of the strongest heat in what has been a mild season. Above-normal temperatures should cover nearly all of the country..

The rally hasn’t been stronger because traders aren’t certain any demand increase has staying power, analysts said. The peak season for summer demand is nearly past, and there are signs that unseasonably cool weather could return late next week, limiting any demand spike. There are also signs the buying is from technical traders or short sellers–traders who bet prices would fall–buying back in to close out their past bets, analysts said.

The record pace of production already dropped gas prices about 20% between mid-June and mid-July, and government forecasters said Tuesday that trend is likely to continue. Unconventional gas from the Marcellus shale and increased drilling in Texas are leading record production, likely to increase 5.3% from last year, according to the Energy Information Administration’s monthly Short-term Energy Outlook. It expects annual growth to continue at 2.1% next year.

The agency dropped its price projections accordingly. It expects 2014 prices to average $4.46/mmBtu, down 6.5% from its July forecast. It dropped its 2015 projection to $4.00/mmBtu, down 11% from what it forecast a month ago.

This article was first published by fxempire.

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