Natural Gas Price Fundamental Daily Forecast – Are We Seeing Early Signs of Short-Squeeze?

Natural gas futures are inching higher on Tuesday despite another outlook calling for warmer trends. Weather models overnight shifted “considerably warmer,” more than enough to offset colder trends from Monday’s runs, according to Bespoke Weather Services.

The price action suggests a bottom may be forming following Friday’s potentially bullish closing price reversal bottom. A bottom at this time, given the bearish fundamentals, would likely ignite the long-awaited “short-squeeze” that speculative buyers have been hoping to see for weeks. They believe that short-sellers have built too large of a position and may be reluctant to continue to sell weakness at current price levels.

At 14:28 GMT, February natural gas is trading $2.134, down $0.002 or -0.09%.

Short-Term Weather Outlook

Bespoke Weather Services said earlier in the day, “While we do see some strong cold on the maps, it remains focused in Canada and down into the western states, unable to shift into key areas of the East and South.”

“We are still watching the shifts in tropical forcing for possible colder risks late month, but the pattern even out at Day 15 does not look inspiring for a material colder shift into the 16-20 day.”

“This puts January 2020 on pace to rank in the top five warmest Januarys going back to at least 1981,” according to Bespoke’s dataset.

According to Natural Gas Intelligence, “Maxar’s Weather Desk highlighted warmer trends in the Southeast at the start of the 11-15 day (Jan. 17-21), with colder adjustments made to the central 48 toward the middle of the period.”

Daily Forecast

The main trend is down according to the daily swing chart, however, Friday’s closing price reversal bottom may be indicating a potential shift in momentum to the upside.

A trade through $2.083 will negate the closing price reversal bottom and signal a resumption of the downtrend.

A trade through yesterday’s high at $2.173 will indicate the buying is getting stronger. This could trigger a counter-trend short covering rally into a retracement zone at $2.217 to $2.249.

The market is currently trading on the strong side of a pair of downtrending Gann angles at $2.126 and $2.086. This could be significant because these angles have been guiding the market lower since early November 4. Crossing to the strong side of these angles could be an indication the selling pressure is getting weaker, or the counter-trend buying stronger.