Natural Gas Price Fundamental Daily Forecast – Bearish Weather, Downside Momentum Put $4.009 on the Radar
Natural gas futures continued their price decline on Tuesday, shedding more than 7%, and putting the market in a position to post its worst monthly performance in about three years. The catalysts behind the selling pressure are forecasts calling for milder December temperatures which should dampen the demand outlook for the fuel to heat homes and businesses.
At 17:50 GMT, January natural gas futures are trading $4.583, down $0.271 or -5.58%. For the month, the futures contract is down about 16%, its worst since December 2018, erasing gains from an initial rally to over $6 per mmBtu.
Once again data from Refinitiv set the early tone. The data provider projected 310 heating degree days (HDDs) over the next two weeks compared with a 30-year normal of 370 HDDs for the period.
Short-Term Weather Outlook
According to NatGasWeather for November 30 to December 6, “A cool shot lingers across the Great Lakes and Northeast this morning with chilly lows of 10s to 30s. However, most of the rest of the U.S. will be mild to nice with highs of 50s to 70s for light demand.
By Wednesday-Thursday, almost the entire U.S. will be warmer versus normal with highs of 40s-50s North and 60s to 70s South as upper high pressure rules for very light national demand.
A weather system/cold shot will push into the Midwest late this weekend into early next week with lows of 10s to 30s for a minor increase in national demand. Overall, national demand will be low to very low.”
EIA Weekly Storage Estimates
Natural Gas Intelligence’s (NGI) machine learning model is predicting a net 58 Bcf withdrawal for the week ended November 26. That would compare bullishly with both the five-year average (minus 31 Bcf) and year-ago (minus 4 Bcf) withdrawals for the period.
January natural gas is trading on the weak side of a key retracement zone at $5.024 to $5.338, making it resistance. This area is controlling the near-term direction of the market.
Earlier today January natural gas futures took out the swing bottom at $4.736, reaffirming the down trend. If this move creates enough downside momentum then look for a near-term test of the August 19 main bottom at $4.009.
With the main trend down and the fundamentals bearish, rallies into $5.024 to $5.338 are likely to be met with fresh short-selling.