Natural Gas Price Fundamental Daily Forecast – Cold is Coming But Short Blast Isn’t Bullish Enough for Prolonged Rally

Natural gas futures are trading lower on Friday after failing to follow-through to the upside following yesterday’s short-covering rally. Thursday’s rally came about after the latest government storage report likely gave some traders a reason to worry ahead of the most significant cold blast so far this season. The upside momentum created by yesterday’s rally may have been dampened by a drop in cash prices across the majority of the United States.

At 12:26 GMT, December natural gas futures are trading $2.455, down $0.010 or -0.41%.

U.S. Energy Information Administration Weekly Storage Report

The EIA reported Thursday that domestic supplies of natural gas rose by 87 billion cubic feet for the week-ended October 18. That matched some estimates, but came in below the average build of 92 billion cubic feet expected by analysts polled by S&P Global Platts.

Total stocks now stand at 3.606 trillion cubic feet, up 519 billion cubic feet from a year ago and 28 billion cubic feet above the five-year average, the government said.

Short-Term Weather Outlook

According to NatGasWeather, “Weather conditions are expected to turn dramatically cooler beginning this weekend when the strongest cold shot in the coming series is forecast to arrive in the Rockies and Plains.”

“The blast is expected to linger in those areas through the early part of next week and then rapidly advance across the southern and eastern United States mid and late next week,” the firm said. Temperatures are forecast to be 15-30 degrees colder than normal with this system for much stronger-than-normal national demand.”

“Although the latest Global Forecast System (GFS) weather model wasn’t quite as frigid with next week’s cold shot, it did show the chilly air lingering a day or two longer, according to NatGasWeather.

Natural Gas Intelligence (NGI) said, “What could be more important is that the model, which had been quick to return warmth to the outlook beyond Day 15, still showed November 6 – 8 to be much milder. Daily heating degree days were seen easing back to near or below normal, ‘when they need to be much above normal to be considered bullish.’”

Daily Forecast

The short-term range is $2.568 to $2.388. Its 50% level or pivot at $2.478 is proving to be major resistance, stopping four attempted rallies this week. Besides being resistance, it is also the trigger point for an acceleration to the upside.

Yes, it will be cold, but the models say it won’t last long enough to put a bullish spin on prices. We’re expecting more downside pressure unless the models change and begin to show longer periods of cold temperatures.