Natural Gas Price Fundamental Daily Forecast – Are Traders Pricing in Improving Weather Picture?

Despite a potentially bullish government storage report, natural gas futures plunged on Thursday as investors failed to react to a bigger-than-expected drawdown. The move suggests that traders perceived the news as stale and that improving weather conditions should eventually lead to an increase of natural gas in storage.

June Natural Gas futures settled at $2.695, down $0.073 or -2.64%.

According to the U.S. Energy Information Administration, domestic supplies of natural gas fell by 36 billion cubic feet for the week-ending April 13. Traders had priced in a draw of about 23 Bcf.

The five-year average for the same week showed inventories climbed by 38 billion cubic feet. Total stocks now stand at 1.299 trillion cubic feet, down 808 billion cubic feet from a year ago, and 449 billion the five-year average, the government said.

Forecast

The daily trend turned up earlier in the week according to the daily swing chart. However, there was very little follow-through which suggests the move was designed to take out stops and give short-sellers a better re-entry price.

The downside momentum created by the heavy selling pressure on Thursday has put the market in a position to challenge the last main bottom at $2.660. Buyers may come in on the initial test of this bottom, but if it fails we’re likely headed to $2.638.

The short-term range is $2.660 to $2.818. Overcoming its 50% level or pivot at $2.739 will signal the presence of buyers. This could lead to a further rally into another 50% level at $2.766.

The erratic price action could continue over the near-term until the weather stabilizes. At the time, the Midwest and Northeast is colder than usual, leading to increased heating demand while parts of the west and southern U.S. are showing signs of increased cooling demand. Traders are having a difficult time trying to figure out when storage will actually start to increase.