Advertisement
Advertisement

Natural Gas Price Fundamental Daily Forecast – Could Strengthen Over $1.884, Weaken Under $1.855

By:
James Hyerczyk
Published: Feb 7, 2020, 12:23 UTC

The daily chart suggests that everything is there to support a rally, however, without a catalyst to drive the strong shorts out of the market, the chart pattern is likely to fail. Balances are tightening so the missing variable must be the weather.

Natural Gas Price Fundamental Daily Forecast – Could Strengthen Over $1.884, Weaken Under $1.855

Natural gas futures are inching lower on Friday after failing to follow-through to the upside following yesterday’s price surge. The price action indicates the market is still being controlled by strong sellers.

Prices jumped on Thursday after the government reported a larger-than-expected storage draw last week. Although the market popped to a new high for the week, the subsequent intraday break indicates the move was likely triggered by weak buy stops rather than new buyers.

At 11:56 GMT, March natural gas futures are trading $1.850, down $0.012 or -0.64%.

Despite today’s early weakness, the market appears to be forming a support base as tight supply/demand balances continue to underpin the market. Nonetheless, a huge number of short sellers continue to keep a lid on rallies. Furthermore, the market is likely to continue to trade sideways to lower as long as the weather forecasts remain bearish.

U.S. Energy Information Administration Weekly Storage Report

The EIA reported on Thursday that domestic supplies of natural gas fell by 137 billion cubic feet (Bcf) for the week-ended January 31. According to Natural Gas Intelligence, estimates were pointing to a withdrawal in the upper 120s Bcf to lower 130s for this week’s EIA report.

Bloomberg was looking for a range of 122 Bcf to 134 Bcf, with a median pull of 129 Bcf. Reuters forecast a median draw of 131 Bcf. The Wall Street Journal predicted a draw as low as 109 Bcf, but its average was 127 Bcf. Meanwhile, the Natural Gas Intelligence model predicted a 125 Bcf withdrawal.

In 2019, the EIA recorded a 228 Bcf withdrawal for the similar period, while the five-year average withdrawal is 143 Bcf.

Total stocks now stand at 2.609 trillion cubic feet, up 615 Bcf from a year ago, and 199 Bcf above the five-year average, the government said.

Short-Term Weather Outlook

According to NatGasWeather for February 7 to February 13, “A strong weather system will track through East today with areas of rain and snow, although with only modest cooling. A reinforcing cold shot will follow across the Northeast overnight and Saturday for a surge in demand as lows reach the 10s & 20s. Additional weather systems are expected into the US next week, but coldest over the lower population states of the Rockies and Plains. The southern US will be cool today to start in the wake of yesterday’s cold front, but now warming back into the 60s and 70s. Overall, light versus normal national demand continues through mid-next week, then increasing.

Daily March Natural Gas

Daily Forecast

The daily chart suggests that everything is there to support a rally, however, without a catalyst to drive the strong shorts out of the market, the chart pattern is likely to fail. Balances are tightening so the missing variable must be the weather.

Traders are basically dealing with two 50% levels. The first is $1.855, the second is $1.884.

A sustained move under $1.855 will indicate the presence of sellers, while a sustained move over $1.844 will signal the presence of buyers. Trading between these price levels will indicate a neutral market.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

Did you find this article useful?

Advertisement