August natural gas gapped lower yesterday and traded down to a low of $2.902, down almost 5.0% and at the lowest since November 2016. The market sank on forecasts for normal to below normal temperatures for the central US and into the East Coast from June 24 to July 2. An extended stretch of mild weather could leave supplies above normal for this time of year and as production from shale basins continues to climb that should continue to pressure the market. Furthermore, the manages money trader category is still carrying a net long position of 82,118 contracts as of June 13, and the recent forecasts have no heat going out to July 2. Therefore, the market continues to search for a low and clearly needs a major shift in the weather before a change in the trend will develop. For now, support is seen down at $2.895 followed by $2.88.
Market Ideas: Monday’s gap lower and breakout under the recent lows gives bear signals, opening up potential for a wash to 2700-. Trade is poised for aggressive selloffs the next few days. Any corrections should struggle to back fill Monday’s gap, which in turn will encourage selloffs. A close over 3004* is needed for a bullish turnaround.
Aug ’17 Natural Gas Daily Chart