Natural Gas Price Fundamental Daily Forecast – Bullish Factors are Lined Up for Rally

Natural Gas took out the November 29 main top at $3.164 early in the session but the rally stalled at $3.169 before prices retreated. The market still finished higher for the session, but the price action suggests that the forecast for extremely cold temperatures for February 6 to 9 may have been fully priced into the market.

March Natural Gas settled at $3.099, up $0.019 or +0.62%.

If the forecast changes and the cold snap is extended beyond February 9 then prices will surge again with the next target $3.272.

If the weather services take out the return of extremely strong temperatures then prices could pull back to $2.931 to $2.875.

On Thursday, traders showed little reaction to a government report that showed a bigger-than-expected decline in U.S. natural gas supply.

According to the U.S. Energy Information Administration, domestic supplies of natural gas fell by 288 billion cubic feet for the week-ended January 19. Traders were looking for a decrease of 272 billion cubic feet.

The five-year average withdrawal is 164 bcf. Total stocks now stand at 2.296 trillion cubic feet, down 519 bcf from a year ago, and 486 bcf below the five-year average, the government said.

Forecast

In an updated report for January 25 to January 31 from NatGasWeather.com, “A reinforcing cold blast will keep the Northeast chilly the next couple of days with lows into the teens and 20s. A mild ridge building over the central and southern U.S. will expand to include the East this weekend with highs warming into the 40s and 50s for the Northeast with 60s to near 70F over the southern U.S. The West will see several weather systems with rain and snow, pushing into the Midwest and South early next week, then into the East mid-next week for strong demand. Overall, national demand will be moderate, then high mid-next week.

The trend is up, the hedge funds are long, supply is being used up and cold weather is coming. These factors have me leaning to the upside. The uptrend is safe at this time, but the buying volume is going to have to continue to increase to sustain the rally.

Continuing to extend the rally beyond yesterday’s high at $3.169 will indicate the hedge funds are willing to buy strength. This is a bullish sign and it could trigger a rally into at least $3.272 over the near-term.

I’m not too worried about the downside at this time. The chart indicates a major support zone has been formed between $2.989 and $2.875.