Natural Gas Price Fundamental Daily Forecast – Early EIA Estimate Calls for Storage Increase

Natural gas futures are trading slightly better after posting a dramatic reversal to the upside on Monday. The price action is not expected to a change the trend to up, but it is an indication that aggressive counter-trend buyers may be willing to come in on weakness at favorable price levels.

The price action may also be indicating that bearish traders may not be willing to sell weakness at current prices levels. In other words, I am not going to read into the move and just sum it up as meaningless price manipulation by buyers and sellers.

Forecast

The main trend is down on the daily chart. However, the market is trying to consolidate. This usually indicates the buying and selling is equal. It also means that investors may be waiting for one more piece of news before making their next meaningful move.

At this time, negative news is piling up. Traders are facing a potentially bearish combination of rising production, falling demand and improving weather conditions.

The short-term range is $2.610 to $2.764. Its 50% level or pivot is $2.687. This price is controlling the direction of the market today.

A sustained move under $2.687 will indicate the presence of sellers. If the selling is stronger enough then this move may generate enough downside momentum to challenge $2.610 to $2.600.

A sustained move over $2.687 will signal the presence of buyers. The first target is the intermediate 50% level at $2.720, followed by a Fibonacci level at $2.747.

The trend will change to up on a move through $2.764, however, I don’t expect to see much of a follow-through to the upside because short-sellers or hedgers will likely be waiting to pounce on the move.

Looking ahead to Thursday’s U.S. Energy Information Administration’s weekly storage report, traders anticipate a small draw of about 14 billion cubic feet for the week-ended April 6. This may be the last draw of the season.

History shows a 10 Bcf increase a year ago and a five-year average increase of 9 Bcf.

Total natural gas in storage currently stands at 1.354 trillion cubic feet (Tcf), according to the EIA. That figure is 697 Bcf, or around 34%, lower than levels at this time a year ago, and 347 Bcf, or roughly 20.4%, below the five-year average for this time of year.

The current price action suggests investors believe the short-fall will be overcome rather quickly.