Natural Gas Fundamental Analysis, April 26, 2017

June Natural Gas prices are trading slightly higher early in Wednesday’s session. The market declined on Tuesday, but the selling dried up as the market neared a key retracement level at $3.120. This suggests that despite the bearish fundamentals, traders are also watching technical indicators like chart levels. Additionally, some oscillators are suggesting the market is oversold.

Fundamentally, mild weather forecasts are dragging the market lower. This is helping supplies of natural gas in storage to build up more quickly in recent weeks. The unusually warm weather is driving down demand for heating. However, it hasn’t been hot enough to drive up demand for air conditioning.

Forecast

We’ve said for weeks that the natural gas market was probably due for a pullback into a major retracement zone at $3.120 to $3.048. We still stand by that forecast despite Tuesday’s short-covering rally into the close.

The current chart pattern suggests the market may be due for a further upside retracement into $3.225. This could set up the next shorting opportunity.

At this time, traders are going to have to decide whether to sell weakness into the retracement zone at $3.120 to $3.048 and face the possibility of getting caught in a bear trap, or wait for a retracement rally.

The current price action suggests investors are playing for the retracement.

As far as the weather is concerned, current forecasts suggest that overall demand for natural gas is likely to be moderate into next week.

The direction of the natural gas market today and the remainder of the week will be determined by trader reaction to the 50% level at $3.120. The fundamentals are not likely to be as important this week as the technical chart pattern.