Looking to the Futures

Natural gas futures traded mixed in Tuesday's trading session as traders are trading around weather outlook reports and inventory levels. Henry hub natural gas futures, /NGN25, settled at $3.722 per MMBtu, up $0.028 from previous settlement. 
 

The National Oceanic and Atmospheric Administration, NOAA, updated their 30-day and three month weather outlook. The NOAA anticipates a hotter than anticipated season with low precipitation throughout the month of June as well over the next three months. A majority of the lower forty-eight states of the USA is leaning above or will be above normal temperatures.
 

Above average precipitation in the lower 48 especially in the South could lead to potentially lower temperatures as well offsetting the higher than normal temperatures that NOAA anticipates. However, the South Is a high humidity region so the increased rainfall may have the opposite effect. 
 

Due to these effects, traders can anticipate people living in these areas to consume more electricity in order to cool their living spaces. That electricity could be produced from multiple energy sources, one of them being natural gas. The more electricity that is consumed the more a bullish impact there will be on natural gas.
 

These outlooks are based on statistical historical models which anticipate how weather may react based upon certain variables that present themselves. Traders use this information in conjunction with inventory reports to anticipate supply and demand fluctuations.
 

Last week, the EIA released a more bearish report on natural gas inventories as they rose 101 bcf. That puts natural gas inventories down 11.7% YoY, but they were 3.9% above the five year seasonal average. Natural gas inventories have been trending higher since March.

Henry hub natural gas futures, /NGN25, settled at $3.722 per MMBtu, up $0.028 from previous settlement. July natural gas opened for Wednesday’s trading at $3.729.
 

Natural gas price action is currently trading above the 50- and 200-day simple moving averages, which indicates a bullish trend. The 50-day SMA is currently at $3.525 and the 200-day SMA is currently at $3.248.
 

The 14 day RSI Has been trending upward towards the 70% overbought threshold, but in Tuesday’s trading session RSI flattened in line with the price action. This is a typical move in an indicated trend.
 

The directional movement index indicates a bullish trend. The ADX (white) Is moving upwards which indicates a building trend. The positive directional index is elevated but it appears to be turning lower as it digests the most recent price action. The negative directional index is depressed and pointing lower indicating an unlikely move on the downside.
 

The patterns on the chart indicate a growing bullish trend however therapy appears to be resistance near the 3.8 and 3.7 range as recent price action appears to have moved lower after reaching that area.

MBA mortgage applications index 7:00 AM ET

ADP employment change 8:15 AM ET

S&P global US services PMI - final 9:45 AM ET

ISM services 10:00 AM ET

EIA crude oil inventories 10:30 AM ET

Beige Book 2:00 PM ET

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