Wednesday, July 31, 2019 at 10:18AM
Weather and fundamentals are tag-teaming to send natural gas prices significantly higher so far today, with the September contract up 9 cents on the day as of this writing. The signs of a rally have been growing since the week started. We began to alert clients back on Monday of the risk for at least a temporary low to be put in, with data unlikely to get any worse, though the background was not yet "bullish" By yesterday afternoon it became clearer that cooler momentum had stopped on the weather side, and stronger burns had improved the fundamentals side, pushing our sentiment to the bullish side. Sure enough, we wound up getting the test of the 2.18 level and then some in the September contract. Weather forecasts moved hotter in the last 24 hours, with both the GEFS and ECMWF models moving more toward an above normal GWDD (demand) regime. The stronger cooling advertised a few days ago has fizzled out. This shows up nicely when looking at the GEFS model for today's 6-10 day forecast compared to what it showed five days ago for the same period. New: Old: While there is still a weak trough passing through the eastern U.S, it is much weaker than the model showed a few days ago, and is followed by hotter conditions across the southern U.S. in the 11-15 day, as illustrated in our forecast. Of course, weather is not the only factor in today's rally. Yesterday's gas burns were the strongest of the summer in absolute terms per our data, despite less heat than what we saw a couple of weeks ago. From a technical perspective, prompt month prices have moved above the 2.18 resistance level, which can now be support, with the next resistance level in the 2.24-2.25 zone. Sign up for a 10-day free trial here to give our research and products a test run to find out where we believe natural gas prices will move next based on our unique approach of tying together weather and fundamentals to highlight price risks.