Natural Gas Price Fundamental Daily Forecast – Short-Covering Due to Near-Term Demand Concerns

Natural gas futures are trading sharply higher on Friday after following through to the upside after posting a potentially bullish closing price reversal bottom the previous session. The short-covering rally is likely being fueled by slight changes in the weather models despite a government storage report that showed a year/year surplus in inventories and a slide in cash market prices.

At 13:57 GMT, June natural gas futures are trading $2.578, up 0.028 or +1.18%.

According to NatGasWeather, “The cold weather system on tap this weekend, seen lasting through the early part of next week, is to be partly credited for Thursday’s rally in the futures strip. Although the latest midday Global Forecast System was mixed, with a few days a touch cooler and a few warmer, it did not hold cooler trends across the northern United States through the middle of next week.”

Bespoke Weather Services said, “Weather models overnight Wednesday had shifted demand higher, with both American and European data adding gas-weighted degree days (GWDD) to the forecast. In particular, the next several days featured some meaningful heating degree days in the north, along with some 85- to 90-degree highs in the South, boosting early season cooling demand there.”

U.S. Energy Information Administration Weekly Storage Report

The EIA reported Thursday that domestic supplies of natural gas rose by 92 billion cubic feet for the week-ended April 19. Traders were looking for a build of about 90 Bcf.

Total stocks now stand at 1.339 trillion cubic feet, up 55 Bcf from a year ago, but 369 billion below the five-year average, the government said.

Daily Forecast

The short-covering rally is impressive, but likely to be short-lived. The upside momentum created by yesterday’s technical reversal bottom could trigger a rally into a technical retracement area at $2.623 to $2.657. A test of this zone is likely to attract fresh selling pressure. Fundamentally, with milder temperatures returning by mid-week, the move will not have the time to develop into a full-fledged rally or change in trend.