Natural Gas Price Fundamental Daily Forecast – Fib Level at $3.873 Must Hold Or Prices Could Accelerate to Downside

Natural gas futures are trading weaker and in a position to challenge the lower end of a major support zone. Traders are reacting to a shift in the shorter-term weather pattern that is calling for milder temperatures into Christmas. Uncertainty over whether colder temperatures will return after December 25 is also weighing on prices.

At 1207 GMT, January Natural Gas futures are trading $3.950, down $0.174 or -4.22%.

U.S. Energy Information Administration Report

On Thursday, the U.S. Energy Information Administration reported that domestic supplies of natural gas fell by 77 billion cubic feet during the week-ending December 7. Ahead of the report, estimates called for a withdrawal in the low to mid-80s Bcf range. Bloomberg predicted a withdrawal range of 72 Bcf to 95 Bcf, and a median of 85 Bcf. Reuters was looking for a withdrawal range of 74 Bcf to 102 Bcf, and a median of 84 Bcf.

Total stocks now stand at 2.914 trillion cubic feet, down 722 billion cubic feet from a year ago, and 723 billion below the five-year average, the EIA said.

Short-Term Weather Outlook

According to NatGasWeather for December 14 to December 20, “A strong weather system will sweep across the South and Southeast the next couple days with areas of rain, locally as snow. The rest of the country into early next week will be mostly mild with highs of 40s and 50s across the northern tier and 60s to locally 70s elsewhere. A fast moving weather system will race across the Northeast early next week with colder temperatures but remaining mild over the rest of the country. Additional weather systems are expected late next week, just not very cold ones. Overall, national demand will be moderate.”

Long-Term Weather Outlook

Further out, the weather forecaster is saying there is still a decent shot of cold into the United States December 23-24 but with conditions moderating across the important eastern part of the country for December 25-27. “Essentially, after teasing colder patterns to open the week for the last week of December, the weather data has backed off some. It’s still a cool pattern, just not impressively cold,” NatGasWeather said.

Forecast

The daily chart pattern suggests investors are bracing for a period of lower demand, which is another way of saying they are betting that temperatures will remain closer to normal for this time of year.

The main trend is up, but momentum is trending lower. The minor trend is down and this is controlling the momentum.

The main range is $3.199 to $4.964. The market is currently trading inside its 50% to 61.8% retracement zone at $4.082 to $3.873. This zone is controlling the longer-term direction of the market.

Holding below the upper or 50% level at $4.082 will indicate the presence of sellers. Taking out the lower or Fibonacci level at $3.873 will indicate the selling is getting stronger. If this level is taken out with conviction, we could see an acceleration to the downside.