Natural Gas Price Fundamental Daily Forecast – Change in Momentum Could Lead to Test of $2.976 to $2.909

Natural gas futures rallied to $3.259 early Tuesday, but the move fell short of a pair of tops at $3.272 and $3.279. The subsequent selling pressure was strong enough to trigger a sell-off into the close. Although the market closed higher for the session, the downside momentum at the close suggested a follow-through move is likely.

March Natural Gas futures settled at $3.195, up $0.028 or +0.88%.

The early rally was likely fueled by speculators betting on the return of extremely cold temperatures in early February, which should boost demand for the heating fuel. However, the selling pressure suggests there may have been a change in the forecast. Some traders pointed out that updated weather forecasting models were calling for milder weather.

Forecast

Natural gas futures are plunging early Wednesday due to a change in the six- to 10-day and eight- to 14-day forecasts. These reports could change again so investors have to prepare for additional volatility. On Monday, these reports called for below-average temperatures across key demand areas in the U.S. The early price action indicates that there may have been an important change in the forecasts.

At 0834 GMT, March Natural Gas futures are trading $3.056, down $0.140 or -4.40%.

This week’s U.S. Energy Information Administration’s storage report is expected to show a draw of about 100 billion cubic feet (bcf) in the week-ended January 26.

That compares with a decline of 288 bcf in the preceding week, a fall of 87 bcf a year earlier and a five-year average drop of 160 bcf.

According to the EIA, total natural gas in storage currently stands at 2.296 trillion cubic feet (tcf). That figure is 519 bcf, or around 18.4%, lower than levels at this time a year ago and 486 bcf, or roughly 17.5%, below the five-year average for this time of year.

The short-term range is $2.693 to $3.259. If the downside momentum continues then we could see a test of its retracement zone at $2.976 to $2.909. Since the main trend is up, buyers may step in on a test of this zone. This may correspond with a better-than-expected storage report on Thursday.

If the storage report is bearish then look for another acceleration to the downside on a sustained move under $2.909.