Natural Gas Price Fundamental Daily Forecast – Could Hold in Range Until Injection Season Begins

As far as today is concerned, the direction of the market is likely to be determined by trader reaction to the 50% level at $2.745. A sustained move over this level will indicate the presence of buyers. A sustained move under this level will mean the selling pressure is increasing. If the selling is strong enough to take out $2.709 with conviction then look for the start of a steep sell-off.
James Hyerczyk
Natural Gas

Natural gas futures opened sharply lower on Monday and the subsequent selling pressure drove the market through the previous session’s low, reaffirming the downtrend on the daily chart. However, the move took the market into a technical support zone and the selling pressure subsided at $2.726.

The early price action highlights one of the factors that could influence the direction of the market this week. With the start of injection season about two weeks away, and weather bouncing between cold and mild, traders may just decide to hold it in a range, which means we could see a choppy two-sided trade.

At 10:36 GMT, May natural gas futures are trading $2.762, down $0.005 or -0.21%.

Daily May Natural Gas

The main range is $2.592 to $2.897. Its 50% to 61.8% retracement zone at $2.745 to $2.709 provided support on Friday at $2.730, and earlier today at $2.726.

The new short-term range is $2.897 to $2.726. If traders decide to hold the market in a range until injection season officially starts then we could see a rally back into its retracement zone at $2.811 to $2.832.

If traders turn bearish and decide to take out $2.709 then the market could begin a steep sell-off with the next target coming in at $2.592.

Short-term Weather Outlook

According to NatGasWeather for March 25 to March 31, “A quick cool shot will sweep across the Great Lakes and Northeast Tuesday and Wednesday with chilly conditions with highs of 30s and 40s then warming during the second half of the week. Most of the rest of the country will be mild to warm but still with weather systems, including the West and Southeast early this week, then the west-central US late week. Temperature-wise, the southern US will be pleasant with highs of 60s to 80s, while mostly seasonal across much of the rest of the US with 40s to 60s. Overall, national demand will swing between moderate and high into next week.”

Daily Forecast

Traders expect only two more weeks of withdrawals before the switch to injection season begins in the first week of April.

Based on current forecasts, traders are looking for a 28 Bcf withdrawal for the week-ending March 22 and a 21 Bcf pull for the week-ending March 29.

With these two pulls, we could be looking at the lowest volume in storage at the start of the injection season since it bottomed out at 824 Bcf March 28, 2014. This is likely to be the bullish factor that drives prices higher when temperatures start to rise.

As far as today is concerned, the direction of the market is likely to be determined by trader reaction to the 50% level at $2.745. A sustained move over this level will indicate the presence of buyers. A sustained move under this level will mean the selling pressure is increasing. If the selling is strong enough to take out $2.709 with conviction then look for the start of a steep sell-off.

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