Natural Gas Futures Dip as Warmer Weather Outlook Eases Late-Season Cold Concerns

Key Takeaways

• Warmer weather outlook for eastern half of Lower 48 in the next 6-10 days causing natural gas futures to trade lower.
• European weather model revised, reducing 11 heating degree days from outlook, aligning better with American dataset.
• Storm system expected to track towards Midwest, bringing below normal conditions for the West and warmer weather for the Eastern Half.

Overview

Natural gas futures are trading lower on Friday, after giving back earlier gains. The catalyst behind the selling pressure is updated weather forecasts that eased back on the amount of late-season cold expected for the eastern Lower 48 later this month.

At 14:00 GMT, May natural gas futures are trading $2.620, down 0.006 or -0.23%. The United States Natural Gas Fund is at $7.88, down $0.47 or -5.70%.

Lower on Warmer Weather Forecast Trends

Recent updates to the European weather model and Maxar’s Weather Desk suggest a warmer trend for the eastern half of the Lower 48 in the next six to ten days.

According to NatGasWeather, the European weather model underwent a significant warmer shift, reducing 11 heating degree days from the outlook and aligning better with the American dataset.

The warmer trend is due to a warmer break expected over the southern and eastern US in the coming week. While a storm system is set to bring heavy precipitation to California by the end of the first five days, it is likely to track towards the Midwest during the early half of the six to ten-day period.

The West is expected to experience below normal conditions, while the Eastern Half will be warmer.

Daily May Natural Gas Technical Analysis

The main trend is down according to the daily swing chart. A trade through $2.499 will signal a resumption of the downtrend. A trade through $2.789 will change the main trend to up.

The short-term range is $2.263 to $3.156. The market is currently testing the lower end of its retracement zone at $2.710 – $2.604.

The main range is $3.321 to $2.263. Its 50% level come in at $2.792. The minor range is $3.156 to $2.514. If the main trend changes to up then its retracement zone at $2.828 – $2.905 will become the next upside target area.

Daily May Natural Gas Technical Forecast

Trader reaction to the short-term Fibonacci level at $2.604 is likely to determine the direction of the May natural gas futures contract into the close on Friday.

Bullish Scenario

A sustained move over $2.604 will signal the presence of buyers. If this creates enough upside momentum then look for the buying to possibly extend into a 50% level at $2.710. The key resistance is next with a price cluster at $2.789 – $2.792.

Bearish Scenario

A sustained move under $2.604 will indicate the presence of sellers. This could trigger a late session break into $2.499. This level is a trigger point for an acceleration to the downside with $2.263 the next target.

A close under $2.604 will put the market in a weak position ahead of the weekend.