Natural Gas Price Fundamental Daily Forecast – Downside Momentum Should Drive Prices into $2.744-$2.708

Natural gas futures are under pressure early Tuesday on renewed concerns over the return of warmer temperatures. Bullish traders are aggressively liquidating positions as the latest 15-day forecast shows a notable warm shift. The news is easing concerns over the end-of-the-winter season stockpile shortage. A plunge in cash market prices is also weighing on prices.

At 12:30 GMT, May natural gas futures are trading $2.772, down $0.013 or -0.47%.

Short-term Weather Outlook

According to NatGasWeather for March 12 to March 18, “Cool conditions linger across the Great Lakes and Northeast but will rapidly warm Wednesday to Friday with highs warming into the 50s and 60s from Chicago to New York City. The southern US and Mid-Atlantic Coast will be warm with highs of 60s to 80s for very light demand apart from a weather system with showers and cooling across North Texas and the Southern Plains. The West remains unsettled but warming late this week. Colder weather systems will arrive east of the Rockies this weekend into next week with lows of 0s to 30s for stronger demand. Overall, national demand will ease to moderate to low late this week, then back to high this weekend.”

Mid-term Weather Outlook

As far as the mid-term weather forecast is concerned, NatGasWeather said, “But where the pattern is most bearish is March 22-26 as a warm ridge expands to dominate most of the country, easing demand to near or lighter than normal.”

“It’s not warm enough to considerably improve deficits” given that five-year average withdrawals for the time of year are relatively light. “With deficits still set to increase to 600 Bcf, the background state is bullish, but…markets have been much more sensitive to mild trends than colder ones.”

In Other News…

The Commodity Futures Trading Commission (CFTC) said positions held as of March 5 indicate that the managed money long sector showed an increase of 18,037 contracts versus the previous week, while short positions declined by 18,202 contracts.

Daily Forecast

Tuesday’s price action suggests the sellers are in control for a second day. If the downside momentum continues then we should see a test of the 50% to 61.8% retracement zone at $2.744 to $2.708. We could see a short-term technical bounce following a test of this zone.

Some traders are saying that with the return of warmer temperatures into the end of the month, the winter withdrawal season is “effectively at an end.”

However, EBW Analytics Group CEO Andy Weissman says, “At this point in the storage cycle, the main question facing the market is the potential strength of demand in the Gulf of Mexico this summer, which is expected to increase significantly compared to last year.”