Natural Gas Price Fundamental Daily Forecast – Is Downside Momentum Strong Enough to Challenge $2.60 Today?

Natural gas is trading slightly lower on Wednesday shortly before the regular session opening after aggressive sellers drove prices sharply lower the previous session.

At 1134 GMT, May Natural Gas futures are trading $2.633, down $0.023 or -0.87%.

Prices fell for a second straight day on Tuesday amid strong production numbers which continue to suggest plentiful supply heading into injection season. Furthermore, expectations that warmer spring temperatures throughout the U.S. will lead to lower demand is also driving prices lower.

Forecast

Looking ahead to Thursday’s U.S. Energy Information Administration’s weekly storage data, traders are expected to see a draw of about 14 billion cubic feet (Bcf) in the week ended April 6. That compares with a decline of 29 Bcf in the preceding week, an increase of 10 Bcf a year earlier and a five-year average rise of 9 Bcf.

Total natural gas in storage 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.

Overall, prices are expected to remain under pressure over the near-term. Despite the fact that stocks in storage are well below their seasonal averages for this time of year, record high domestic production levels have offset this fact.

Additionally, the lingering below average temperatures are starting to soften, suggesting that mild spring temperatures are just around the corner. Since professional traders look 10 to 14 days ahead, this new forecast is mainly driving the price action in the futures market.

The futures market is trading well below its key pivot today at $2.687 which suggests the selling pressure is getting stronger. If the downside momentum continues today, we should see a test of the main bottoms at $2.610 to $2.600. Don’t be surprised if there is a technical bounce, however, due to oversold short-term technical conditions.