Natural Gas Price Fundamental Daily Forecast – Bearish Winter Outlook Confirmed after Spreads Turn Negative

Natural gas futures are edging higher on Wednesday as oversold technical factors are encouraging weak short-sellers to take profits and amid a slight shift in the short-term weather models. Nonetheless, the long-term patterns remain bearish with a key price spread flipping to negative on Tuesday, signaling bullish traders may have thrown in the towel on the chances of a meaningful winter rally.

At 11:23 GMT, January natural gas futures are trading $2.488, up $0.089 or +3.71%.

Weak Cash Market Could Spread into Futures

Natural Gas Intelligence (NGI) reported that spot gas prices were mixed Tuesday but most market hubs posted small changes day to day. NGI’s National Average slipped 2.0 cents to $2.385.

NGI also reported the price action in the cash market may be temporary as milder weather is on tap for later this week, with potential downside possibly spilling over to the NYMEX futures curve.

Mobius Risk Group said even with little risk of having “too much gas” at the end of winter, the speculative community remained considerably long and traders looking to exit positions could drive prices lower.

The latest Commodity Futures Trading Commission data showed the market as of December 1 was 10,000 lots longer than it was the prior week and well above what would be deemed “equilibrium.”

Weather continues to “drive the bus,” according to Mobius, at least until storage inventory numbers show a weather-adjusted tightness which cannot be ignored, “or until the blow torch of a winter eases up.”

NatGasWeather Outlook

NatGasWeather said the overnight and latest midday weather data failed to trend meaningfully colder for the coming 15 days, with only a brief period December 14-15 being close to cold enough to satisfy.

What continues to make the coming pattern “emphatically bearish,” according to the forecaster, is the back end of the 15-day forecast remains solidly warmer than normal over vast stretches of the United States.

“…We think there’s potential for more ominous cold to arrive beginning around December 24-27, but that wouldn’t show up in the 15-16-day weather maps for another few days,” NatGasWeather said.

Daily Forecast

We the longer-term forecasts looking more and more bearish, traders have likely flipped into the sell the rally mode. Don’t be surprised by a few days of potentially bullish headlines. These are designed to shake out the weaker shorts and to trigger a near-term retracement.

Our short-term range is $3.002 to $2.368. If any short-covering rally gains enough momentum then look for a potential drive into $2.685 to $2.760. A test of this area will offer the next shorting opportunity.

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