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James Hyerczyk
Natural Gas

Natural gas futures are trading lower on Monday and for the first week in three, there was no gap on the opening. This suggests that traders were anticipating warming trend that was essentially confirmed in the forecasts from over the weekend.

Although the market opened lower, there hasn’t been too much of a follow-through to the downside. This could be because traders anticipate another round of colder temperatures for key U.S. demand areas later this month.

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At 15:20 GMT, March Natural Gas futures are trading $2.602, down $0.054 or -2.03%.

Weather Remains the Focus

EBW Analytics Group said the current weather models see “the earliest cooling by nearly a week” and a “large loss in natural gas demand” for the next two storage weeks.

“Further, even with the bearish weekend model shift, the year/year storage surplus is still likely to largely evaporate this month,” they said. “While futures are initially trading lower this morning, therefore, they could still hold onto some of last week’s gain.”

Bespoke Weather Service’s forecast didn’t vary much from the EBW outlook.

“The nearer-term forecast, with no quality cold source anywhere in North America, rolled forward warmer,” Bespoke said. “…Once we do see a true cold source develop up in Canada, it looks to impact the less populated western U.S. rather than the eastern half, keeping national demand no better than near normal in such a scenario.”

This led the firm to remove 15 gas-weighted degree days from its projections compared to Friday’s forecast, Natural Gas Intelligence (NGI) wrote.

Still, “models do maintain some negative North Atlantic Oscillation tendencies into late month” that could lead to some cold in the West shifting eastward. This “keeps the medium-range pattern interesting, and could mean some additional run-to-run model volatility this week,” Bespoke said.

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Short-Term Weather Outlook

According to NatGasWeather for January 11 to January 17, “A slow moving weather system will bring rain and snow to Texas and the South the next couple days with cool highs of 30s to 50s. The rest of the U.S. will be cool to start Monday with lows of 0s to 30s for moderate demand, then warming above normal the rest of the week into the 40s to 70s for light demand. Demand will moderately increase next weekend as a weather system/cold shot sweeps across the Great Lakes and extends to the Southeast with heavy showers, although countered by warmer than normal temperatures most elsewhere. Overall, moderate demand today, then low the rest of the week.

Daily March Natural Gas

Daily Forecast

The main trend is down and downside momentum seems to be increasing. We’re looking for the selling to extend into $2.500 to $2.445 over the short-run.

Watch for aggressive counter-trend buyers on the first test of $2.500 to $2.445. They are going to try to form a potentially bullish secondary higher bottom.

A break through $2.445 will indicate the selling pressure is increasing which sets up the possibility of an eventually retest of $2.268.

On the upside, a pair of main tops at $2.732 and $2.750 is resistance. This is followed by the main 50% level at $2.794.

For a look at all of today’s economic events, check out our economic calendar.

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