Natural gas futures are edging higher shortly after the New York opening on Tuesday. One catalyst is an early report showing a drop in daily output. The other is weather forecasts calling for higher than previously expected temperatures during the early part of July.

This likely means the prompting of power generators to burn more gas to cool homes and businesses. Adding to the volatility was the expiration of the July futures contract.

At 13:39 GMT, August natural gas futures are trading $6.632, up 0.086 or +1.31%. The United States Natural Gas Fund ETF (UNG) is at $22.65, up $0.54 or +2.44%.

Refinitiv Reports Lower Daily Production

Data provider Refinitiv said average gas output in the U.S. Lower 48 states slid to 95.1 billion cubic feet per day (bcfd) so far in June from 95.2 bcfd in May. That compares with a monthly record of December 2021.

On a daily basis, output was on track to drop 1.8 bcfd to a preliminary two-week low of 94.3 bcfd on Tuesday.

Refinitiv Sees Higher Demand on the Horizon

With hotter weather coming, Refinitiv projected average U.S. gas demand including exports would rise from 94.0 bcfd this week to 95.9 bcfd next week.

NatGasWeather See “Rather Bullish Pattern” Developing

The latest runs of the American and European weather models were showing notably hotter trends day/day, advertising a “rather bullish pattern” for the first 12 days of July, according to NatGasWeather.

The upcoming pattern is “plenty hot enough” to impress the natural gas markets, but “it would simply be more ominous” without  the prolonged outage at the Freeport liquefied natural gas terminal offsetting some of the weather-driven demand, the firm noted.

Daily Forecast

Technically speaking, the main trend is down. However, new buyers are expected to come in on a sustained move over the key retracement zone at $6.587 to $5.865.

Prices could accelerate to the upside if buyers can take out the minor top at $6.950. Look for the rally to continue into the short-term retracement zone at $7.854 to $8.276 if this move increases both speculative buying and short-covering.

NatGasWeather further added, “To our view, if weather patterns remain hotter than normal most days in July and August, as we expect, the damage inflicted from the Freeport outage will be minimized for now.”

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This article was originally posted on FX Empire

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