Natural Gas Price Fundamental Daily Forecast – Colder Trends Supportive, but Gains Capped by Virus Impact

Natural gas futures finished higher on Friday as investors reacted to rising demand for risky assets and heightened volatility in commodity markets, especially the energy sector. Prices were also supported by colder trends in the latest weather forecasts.

NatGasWeather issued colder guidance overnight, reversing milder trends from Thursday’s data, and underpinning the market from the opening on Friday. Colder trends were focused around weather systems moving into the northern United States around the middle of next week and also March 21-24, the forecaster said, and Natural Gas Intelligence (NGI) reported.

On Friday, May Natural Gas settled at $1.901, up $0.016 or +0.85%.

NatGasWeather Sees Increasing Demand

“The weather data has been inconsistent all week, jumping between milder and colder trends,” NatGasWeather said. “But with the latest data gaining back demand, this could be part of the reason prices are higher overnight and back over $1.90 for the April contract. However, it’s “difficult to know with any certainty since huge hourly moves continue in most major equity and commodity markets, with oil and equities up nearly 5% in overnight trade.”

EBW Analytics Group Says Bulls in Control

In what has been a volatile week, as of early Friday, natural gas bulls were “firmly in charge” once again, according to analysts at EBW Analytics Group, NGI reported.

“The European model once again reversed course, regaining nearly all of yesterday’s losses,” the EBW analysts said. “Further, price movements in the natural gas market continue to be accentuated by equities, which are up sharply this morning on hopes for federal legislation to address the coronavirus crisis.

“We expect seesaw trading to continue, with the market torn between very weak near-term fundamentals and bulls expecting production to plummet and natural gas to post gains.”

Coronavirus Shutdowns Could Impact Demand

Analysts at Genscape, Inc. said they’re operating with a baseline assumption that natural gas demand impacts from efforts to contain the outbreak could resemble the impact of the weekend reductions in consumption, Natural Gas Intelligence (NGI) reported.

“At present, it appears that the coronavirus-triggered precautions are compelling more employees to work from home, closing some businesses and shutting schools, trends common to weekends,” Genscape senior natural gas analyst Rick Margolin said. “Generally speaking, the ‘weekend effect’ lops demand by about 7% compared to mid-week levels. Since 2014, the effect in March is actually smaller, about a 4% drop versus weekdays.”

Natural Gas Intelligence also reported that Genscape estimates show this would mean a roughly 3 Bcf/d decline in demand for March. For April, the impact of week-end like conditions would mean a 5 Bcf/d drop compared to weekday levels, and for May this would be a 5.6 Bcf/d drop-off.

“The actual impact, though, could likely be greater than a standard weekend effect as some businesses retreat from even baseline operations, businesses that do normally operate during weekend are removed from the stack; large-gathering energy-drawing events like sporting matches and conferences are canceled; and the fact that this doesn’t account for any potential recessionary impacts,” according to Margolin.

Technical Analysis

The main trend is up according to the daily swing chart. It turned up early last week. However, momentum shifted late last week with the formation of a closing price reversal top on March 11 and its subsequent confirmation on March 12.

A trade through $2.044 will shift momentum to the upside and signal a resumption of the uptrend.

A move through $1.801 will change the minor trend to down. A trade through $1.657 will change the main trend to down.

The key support zone comes in at $1.851 to $1.805.

The key resistance zone is $1.943 to $2.010.