Natural Gas Price Fundamental Daily Forecast – $2.775 is Possible This Week if the Weather Cooperates

Natural gas futures gapped higher on Monday as colder trends crept into the forecast over the long holiday weekend. Natural Gas Intelligence (NGI) reported that compared to expectations prior to the New Year’s Day holiday, forecasts have shifted “materially colder,” enough to add around 20 gas-weighted degree days to the outlook through mid-January, according to Bespoke Weather Services.

At 15:03 GMT, February natural gas futures are trading $2.618, up $0.079 or +3.11%.

“While the 15-day period as a whole remains solidly warmer than normal, we have chipped away at a good deal of the warmth, and it is important, in our view, to note that the colder changes are focused over the next eight to 10 days,” Bespoke said. “This signals risk that models toward mid-month and beyond could again be too warm.”

Short-Term Weather Outlook

According to NatGasWeather for January 4 to January 10, “Weather systems with rain and snow will impact the Northwest and Northeast Monday-Tuesday, although only slightly cool with highs of 30s to 50s. The rest of the U.S. will be mild with highs of 30s-50s across the north-central U.S. and 50s to 70s for the southern U.S. A new weather system will strengthen over the central U.S. mid-week, then track into the South and Southeast Thursday-Friday with slightly cool highs of 40s and 50s. Light demand this week will increase to moderate this weekend as lows of 10s to 30s spreads across the U.S. besides the far South.”

US Energy Information Administration Weekly Storage Report

Thursday’s EIA weekly storage report surprised to the downside for the second week in a row. The government report showed a much smaller-than-expected 114 Bcf withdrawal from stocks for the week-ending December 25.

Last year, the EIA recorded an 87 Bcf draw for the similar week, while the five-year average is a 102 Bcf draw.

Total working gas in storage fell to 3,460 Bcf, which is still 251 Bcf above year-ago levels and 206 Bcf above the five-year average.

Weekly Forecast

The charts indicate the short-term direction of the February natural gas market this week will be determined by trader reaction to a 50% to 61.8% retracement zone at $2.519 to $2.579.

Look for an upside bias on a sustained move over $2.579, which could put a recent top at $2.775 back on the radar, but the downside bias will resume on a sustained move under $2.519.

Bespoke Weather Services added, with liquefied natural gas (LNG) exports above 11 Bcf/d and production flat, “the recipe is there for a continued move higher this week, possibly toward $2.75, assuming the weather pattern can hold,” the firm said.

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