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James Hyerczyk
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Natural Gas
Natural Gas

The early price action in natural gas futures suggests investors aren’t too concerned about this first wave of extremely cold temperatures predicted to hit key demand areas, but rather the outcome of the uncertain 8 to 10 day forecast.

At 0835 GMT, March Natural Gas futures are trading $3.090, down $0.085 or -2.68%.

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Natural gas prices finished the week slightly below their highest level since November 15 on Friday, suggesting they had enough upside momentum to open higher today. However, sellers hit the market hard from the start early Monday morning, driving prices through Friday’s low. This price action helped make $3.197 a new minor top.

Daily March Natural Gas

Forecast

Based on the early price action, it looks as if the cold temperatures forecast to hit high demand areas in the U.S. later this week have been fully-priced into the market.

According to NatGasWeather.com for the period January 29 to February 4, “High pressure will cover the East Coast Monday, but quickly cool Tuesday-Wednesday as a cold blast currently sweeping through the Midwest/Great Lakes arrives with highs of only 20s to lower 40s.”

“A blast of Arctic air will push into the north-central U.S. Wednesday-Thursday where lows will drop into the 20s to minus 10F, then advancing into the East Friday – Saturday.”

“The West will see mid-high pressure dominate most areas with above normal temperatures.”

“Overall, national demand will be moderate for another day, then high.”

I believe this forecast drove the market higher last week.

The 8 to 10 day forecast could bring even colder temperatures to key areas, but this report is still being put together by the weather services. This is the report that is likely to trigger the next buying spree if it forecasts another round of extremely cold temperatures.

Remember that “cold blasts” mean short-term moves in the market while “cold temperature zones”, “polar vortexes” and “lingering cold domes” tend to indicate longer periods of cold temperatures and bigger more aggressive rallies.

On the upside, the resistance is layered at $3.197, $3.272, $3.279 and $3.391.

The short-term range is $2.693 to $3.197. Its retracement zone at $2.945 to $2.886 is the primary downside target.

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