Natural Gas Price Fundamental Daily Forecast – Buyers Likely to Return on Test of $2.517 to $2.457

Natural gas futures are trading lower early Friday after posting an inside move the previous session. The price action suggests the nearly two week long short-covering rally may have run out of steam after the government storage report fell short of expectations.

Although prices could weaken over the near-term, they’re not likely to fall apart because the market appears to be well supported by continued strong U.S. liquefied natural gas (LNG) exports and the potential for colder domestic temperatures later in the month and maybe into early February.

At 12:11 GMT, February natural gas futures are trading $2.648, down $0.081 or -2.97%.

One good thing has come out of this week’s move, at least we know where resistance is located on the charts. On Wednesday, the market posted a high at $2.770, just shy of its December 22 top at $2.775.

US Energy Information Administration Weekly Storage Report

U.S. natural gas in storage fell by 130 Bcf last week, according to the EIA. Storage inventories decreased to 3.333 Trillion Cubic Feet (Tcf) for the week-ended January 1. The withdrawal was less than an S&P Global Platts survey of analysts calling for a 13 Bcf pull. Responses to the survey ranged from a 121 to 157 Bcf withdrawal.

The pull was much stronger than the 48 Bcf draw reported during the same week last year as well as the five-year average of 115 Bcf, according to EIA data.

Ahead of the report, Natural Gas Intelligence (NGI) wrote, “A Bloomberg survey found estimates ranging from a pull of 124 Bcf to a decrease of 146 Bcf, with a median forecast for a 138 Bcf decline in stockpiles. A Reuters poll found withdrawal estimates spanning from 118 Bcf to 158 Bcf and a median estimate of a 135 Bcf decline.”

“A Wall Street Journal poll, meanwhile, landed at an average pull of 137 Bcf, though estimates ranged from a decrease of 119 Bcf to a decline of 158 Bcf. NGI modeled a 135 Bcf withdrawal.”

Short-Term Weather Outlook

According to NatGasWeather for January 9-14, “Weather systems with rain & snow will impact the Northwest and Southeast today, although mild with highs of 30s to 50s. Cooler air will spread across much of the U.S. this weekend with highs of 20s to 40s across the northern U.S. and 40s to 60s across the southern U.S., increasing national demand to moderate levels.

However, above normal temperatures will return across much of the U.S. mid-next week with highs of 30s to 50s across the northern U.S. and 50s to 70s across the southern U.S., even though still unsettled over the South and Southeast. Overall, moderate demand this weekend, then back to low next week.”

Daily Forecast

A failure to overcome $2.775 indicates sellers are still in control. Crossing to the weak side of the Fibonacci level at $2.706 indicates the selling pressure may be getting stronger.

If the 50% level at $2.621 fails as support then look for the selling pressure to possibly extend into a retracement zone at $2.517 to $2.457. Trader reaction to this zone could determine the near-term direction of the market.

Look for aggressive counter-trend buyers to come in on a test of $2.517 to $2.457. They are going to try to form a potentially bullish secondary higher bottom.

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