Takeaway

The presenter argues for a bullish short-term outlook on natural gas, with the October contract (NGV26) positioned to test the $3.00 level. This view is driven by strong fundamental support from persistent hot weather driving power demand, ramping US LNG exports, and a bullish storage expectation, which is prompting managed money to cover short positions.

What the presenter said

• The spot October contract is trading at 2.9460, up almost 1.5%, and is now above key moving averages like the 48-period EMA. [00:14]
• Tomorrow's EIA storage expectation is around +30 BCF, which the speaker views as bullish compared to last year's +50 BCF injection and the five-year average of +37 BCF. [01:06]
• The latest Commitment of Traders report shows managed money covered 24,521 short contracts, a bullish signal indicating potential for further upside. [01:27]
• Demand from the power sector remains strong due to extreme heat. In Texas (ERCOT), natural gas makes up 45% of the fuel mix. [02:46]
• Heat risk warnings from the National Weather Service are expanding, covering 32 million people today, 59 million tomorrow, and 60 million on Friday, with a heat dome forecast to persist over the southern US for the next 6-10 days. [03:41, 05:18]
• US LNG export facilities are running strong, with Plaquemines noted as running 4 BCF over its nameplate capacity and total flows firming. [09:27]
• Low European gas storage levels, particularly in Great Britain (31.3% full), are causing UK prices to push 2023 highs, adding external support. [05:50, 07:12]
• The presenter sees the path of least resistance as being to the upside, potentially hitting the $3 mark following tomorrow's storage report. [12:20]

Trade ideas

• Instrument: October Natural Gas futures (NGV26)
  • Direction: Long
  • Entry: Unspecified
  • Target: 3.00
  • Stop: Unspecified
  • Horizon: Short-term
  • Conviction: High
  • Rationale: The presenter cites bullish technicals (above 48-period EMA, positive RSI), strong LNG demand, managed money short covering, and a bullish storage expectation.

Levels and data cited

Price Levels: * October Natural Gas (NGV26): Trading at 2.9460; daily pivot at 2.903; resistance tested at 2.9560; recent high of 2.9520; target at 3.00. * Front-to-back spreads: Downside gap at 0.927; potential to climb back toward 1.25. * Day Ahead Power Prices: ERCOT expected up to $67; MISO up to $341; PJM almost $450; SPP up to $175.

Data Cited: * EIA Storage: Expectation for tomorrow is +30 BCF, compared to +50 BCF last year and a +37 BCF 5-year average. * Commitment of Traders: Managed Money short positions were reduced by 24,521 contracts. * National Weather Service: Heat risk affects 32m people today, 59m tomorrow, and 60m on Friday. The 6-10 and 8-14 day outlooks show persistent heat in the South. * ERCOT: Demand below 87,000 MW, with natural gas providing 45% of the fuel mix. * European Storage (KYOS): EU underground storage is 65.4% full; Great Britain is 31.3% full. * US LNG Deliveries: Cameron at 1.5M Dth/d; Freeport at 1.8M Dth/d; Creole Trail at 1.26M Dth/d; Golden Pass Train 1 flowing 365,000 Dth/d but not yet loading.

Risks and what would invalidate this

• There is a downside gap at 92.7 cents on the front-to-back spreads, which could see selling pressure or profit-taking.
• Golden Pass LNG's Train 1 is not ramping up as expected and is not yet loading vessels.
• The Saharan Air Layer is currently inhibiting tropical storm development in the Mid-Atlantic.