Natural Gas Price Fundamental Daily Forecast – Futures Expiration Volatility Could Offset Bearish Fundamentals

Natural gas futures are trading flat shortly before the regular session opening on Wednesday, following a pair of volatile sessions to start the week. The volatility should not come as a surprise since it is expiration week and wild prices swings have been known to happen.

Yesterday’s price action seems to have identified the key area on the chart that will determine the near-term direction of the market. That zone is $5.832 to $6.011.

At 11:43 GMT, December natural gas futures are trading $5.978, down 0.025 or -0.42%.

Other than the volatility from a contract expiration, the bulls are not getting much love at this time amid an improving U.S. supply situation and the absence of cold weather in the forecasts.

Short-Term Weather Forecast

According to NatGasWeather for October 27 to November 2, “Rain and snow continues over the West, while a second system tracks across the East, both with mild highs of 40s to 60s. Texas will be hot today with highs of upper 80s to low 90s, while pleasant highs of 70s-80s will stretch from the Plains to the Southeast.

The wet system over the West will track into the Plains & Texas Wednesday-Thursday with heavy showers and highs of 40s-70s, finally reaching the Northeast late in the week.

Overall, national demand will be moderate today, light mid-week through the weekend due to little coverage of lows below freezing or highs into the 90s, then increasing early next week as a cold shot arrives over the Midwest.”

Government Report Expectations

NGI is reporting that Thursday’s government storage report may reveal another larger-than-normal increase. The natural gas analysts modeled a 94 Bcf build in stocks for the week-ending October 22. This would be well-above last year’s 32 Bcf injection and the 62 Bcf five-year average build, as recorded by the Energy Information Administration (EIA).

Total stocks now stand at 3.461 trillion cubic feet (Tcf), down 458 Bcf from a year ago and 151 Bcf below the five-year average, the government said.

Daily Forecast

With milder temperatures predicted to return November 5, it’s hard to get excited about a rally. The situation isn’t that much better in Europe with NatGasWeather forecasting near-normal to warmer-than-normal conditions for November 7-25.

Technically, a sustained move over $6.011 will indicate the presence of buyers on Wednesday, but that could be the contract expiration talking so the move will be short-lived.

On the downside, a sustained move under $5.832 will be a sign of weakness, but losses may be limited to $5.652 – $5.514, then $5.269 – $4.956. The latter being the major support.