Natural Gas Price Fundamental Daily Forecast – Drop in Spot Prices Driving Futures Lower

Natural gas futures are trading slightly higher early Thursday as speculative investors continue to price in the possibility of the return to more average temperatures into the end of the month.

At 1024 GMT, May natural gas futures are trading $2.765, up $0.006 or +0.22%.

On Wednesday, prices fell sharply lower as forecasts turned milder for late in the month. Most of the recent rally has been driven by a rally in the spot market. However, prices collapsed on Wednesday after a big drop at SoCal Citygate. This paved the way for a drop in prices throughout the country.

Forecast

The technical picture turned bearish on Wednesday after the trend changed back down on the daily chart. Earlier in the week, the trend changed to up, but the price action suggested the move was fueled by buy stops rather than aggressive buying.

The lack of buying and a shift in the weather forecast brought the sellers back in, driving prices through $2.739 and turning the main trend back to down. Although there wasn’t much of a follow-through to the downside after the trend changed to down, buyers are likely to have a hard time overtaking resistance at $2.775, $2.817 and $2.831.

At this time, investors are dealing with two major ranges and retracement zones. Trader reaction to these areas are dictating the price action.

The main range is $2.951 to $2.600. Its retracement zone at $2.775 to $2.817 is providing the resistance.

The short-term range is $2.600 to $2.831. Its retracement zone at $2.716 to $2.688 is possible support. This lays the groundwork for a possible rangebound trade over the near-term. This is because a tight spot market will provide support while an improving weather outlook will create the resistance.

Essentially, this means that time is on the side of the bearish traders because temperatures will eventually warm up as the spring season begins.

Looking ahead to today’s government report, the early call is for a draw of 100 Bcf. Last week, the Energy Information Administration reported a -57 Bcf change for the week-ending March 2.