Natural Gas Price Fundamental Daily Forecast – Early Short-Covering Rally Ahead of Thursday’s EIA Report

Natural gas futures are trading higher on Wednesday shortly after the regular session opening which probably means one of the weather services introduced colder temperatures into their recent bearish forecasts. The news is not likely a trend changing event, but it is enough to shake the tree a little and chase out a few of the weaker shorts.

At 13:07 GMT, January natural gas futures are trading $2.902, up $0.058 or +2.04%.

NatGasWeather Short-Term Weather Outlook

According to NatGasWeather for November 18 to 24, “Chilly conditions continue across the Midwest and Northeast with lows of 10s to 30s for moderately strong national demand. Demand would be stronger if not for the southern U.S. quite nice with highs of 60s to 80s. Weather systems with heavy rain, snow, and wind will crash into the West Coast with mild to cool highs of 30s to 50s. After the Northeast system exits today, much of the U.S. will become warmer than normal Thursday – Sunday with highs of 40s to 60s North, and 60s to 80s South for light national demand. Overall, moderate demand through Wednesday, then low.”

US Energy Information Administration Weekly Storage Report

The EIA reported last Friday that domestic supplies of natural gas rose by 8 million cubic feet for the week-ended November 6. On average, the supply data, which were delayed by a day this week due to Wednesday’s Veteran’s Day holiday, were expected to show a decline of 4 billion cubic feet for the week, according to analysts polled by S&P Global Platts.

Total stocks now stand at 3.927 trillion cubic feet, up 196 billion cubic feet from a year ago, and 176 billion cubic feet above the five-year average, the government said.

Preliminary forecasts point to another increase for the week-ended November 13.

Bespoke Weather Services said, “Supply/demand balances continue to run strong enough so that it would be supportive if only we did not have the high-end warm pattern in place.”  Because of the comfortable temperatures, “the balance is not as tight as it had been, with last week’s EIA report as well as projections for this week’s number both indicating some loosening due to weaker weather-adjusted power burns and some uptick in production.”

Daily Forecast

While not particularly bullish news, the introduction of some weather-related demand is providing support even if it is only short-covering. Technical factors could also be contributing to the early strength since most conventional indicators are in oversold territory.

The nearest resistance is a 50% to 61.8% retracement zone at $3.006 to $3.053. Since the main trend is down and the near-term fundamentals still bearish, sellers would likely reemerge on a test of this zone. However, we may not even get there today unless there is a drastic shift to colder temperatures in the forecast.

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