Natural Gas Price Fundamental Daily Forecast – Gaps Lower as Forecasts Continue to Call for Warming Trend

Natural gas prices gapped lower on Monday which can only mean one thing, the weekend weather forecasts put back the warming trend, which some talked about lifting during Friday’s session. The early weakness also seems to be downplaying last week’s bullish U.S. government storage report. Furthermore, today’s weakness further delays the possibility of a short-squeeze that some analysts started to talk about late last week.

At 13:56 GMT, February natural gas is trading $2.215, down $0.095 or -4.11%.

Last Friday’s Outlook

At the mid-session on Friday the recent forecast moved a little closer to the cooler side, putting a bullish spin on the trade into the close.

“The midday Global Forecast System (GFS) data Friday showed stronger cooling for the Northern United States January 1-4,” according to NatGasWeather. Afternoon data from the European model also showed colder air moving into the northern part of the country but was not as cold as its American counterpart.”

“They both show a better pattern to start January,” the forecaster said. “Not bullish without colder trends, but better. It’s possible the weather data has trended too warm since both the GFS and European models currently show” accumulated national heating degree days (HDD) coming in more than 50 HDDs below normal for the 15-day outlook period, Natural Gas Intelligence added.

“Therefore, adding numerous HDDs back wouldn’t be a surprise,” according to NatGasWeather. “But what will be of primary interest is if the weather data is able to trend colder for the first week of January” and thus “counter the damage done from the coming 12 days of very warm December temperatures.”

Daily Forecast

Some traders covered their shorts into Friday’s close because of the uncertainty created by the midday outlook. Originally, traders were looking for stronger cooling around January 3-5, but this was moved to January 1-4, encouraging some of the weaker shorts to bailout of their bearish positions.

The early price action suggests the forecast may have changed back to the original outlook.

The short-term range is $2.169 to $2.351. Its 50% to 61.8% retracement zone at $2.260 to $2.239 is controlling the direction of the market.

Look for the bearish tone to continue as long as the market remains under $2.239 with $2.169 the next major target.

Overtaking and sustaining a move over $2.260 will indicate the return of buyers. This will also suggest another shift in the forecast.