Natural Gas Price Fundamental Daily Forecast – Bullish Over $2.989, Bearish Under $2.902

Natural gas futures are trading lower early Monday. Sellers came in shortly after the opening to drive prices below Friday’s low. There was no follow-through to the upside after Friday’s strong rally. This suggests investors may have already moved on from last week’s government report that showed the largest draw in history.

At 0930 GMT, March Natural Gas futures are trading $2.937, down $0.056 or -1.87%.

To recap last week, natural gas futures surged late in the week in reaction to bullish U.S. government data. A report from the Energy Information Administration showed the extremely cold weather in the U.S. the week before led to the biggest drop ever recorded for natural gas stockpiles.

For the week, March Natural Gas futures settled at $2.993, up $0.248 or +9.03%.

According to the U.S. Energy Information Administration, U.S. weekly inventories of natural gas tumbled by 359 billion cubic feet the week-ending January 5, topping the previous record decline of 288 billion four years ago. Traders were looking for a drawdown of 318 billion cubic feet.

Inventories totaled 2.767 trillion cubic feet as of January 5, 12.1 percent below the 5-year average and 13 percent below year-earlier levels, according to the EIA.

Forecast

Looking ahead to this week, preliminary estimates show that traders expect the EIA report to show a draw of -195 Bcf. That would compare with -243 Bcf last year and -215 Bcf for the five-year average.

As far as the weather is concerned, NatGasWeather.com says “Very cold air now covers the East, with another reinforcing Arctic front currently arriving into the Midwest, where areas of light snow will increase Monday, then advancing into the East Tuesday. Lows will reach 15 degrees Fahrenheit to minus 15 degrees Fahrenheit over the northern U.S. through Thursday for very strong demand, with 20s and 30s into the South and Southeast. The West will be mostly mild to open the week, then cooling late in the week as weather systems arrive off the Pacific. Overall, national demand will be high to very high this week, then easing this coming weekend.”

The daily chart pattern suggests that unless there is another lingering cold snap, natural gas is likely to remain rangebound.

The main range was formed by the November 10 top at $3.272 to the December 21 bottom at $2.532. Its 50% to 61.8% retracement zone is $2.902 to $2.989. Trader reaction to this zone will determine the near-term trend of the market.

A sustained move over $2.996 will give the market an upside bias. A sustained move under $2.902 will indicate a downside bias. Natural gas has been straddling this zone for three days.