Natural Gas Price Fundamental Daily Forecast – “Lingering” Cold Could Trigger Breakout Over $3.223

Natural gas futures spiked higher early Monday, catching many traders by surprise and triggering a massive short-covering rally. The market retreated from its high, but still managed to close higher for the session. The catalyst behind the rally was a change in the weather forecast which showed a return to colder weather after a warm spell in the eastern U.S.

December natural gas futures settled at $3.156, up 0.043 or +1.38%.

At 0709 GMT, natural gas is trading $3.155, down 0.001 or -0.03%.

Monday’s early price action changed the main trend to up according to technical indicators when the market crossed the recent top at $3.185. However, despite the strength, buyers still had a hard time taking out a major 50% to 61.8% retracement zone at $3.183 to $3.223.

On the downside, a new support zone was formed at $3.105 to $3.083.

According to reports from natgasweather.com, a weather system with cooler temperatures is expected to linger across the northern and eastern U.S. through the first week of November.

Forecast

The key word in the forecast is “linger”. Natural gas speculators tend to cling to key words. A “cold blast” tends to trigger price spikes, but “linger or lingering” may help fuel an actual up trend. That’s why this developing rally may be different than previous rallies the past month.

The support base looks good and should be enough to support a rally, but the buying has to be strong enough to overcome the resistance zone at $3.183 to $3.223. Buyers have to come in with enough conviction to drive out the major short-sellers who are defending the downtrend. We could see a major breakout to the upside if buyers can take out $3.223 with strong volume.

Looking ahead to Thursday’s U.S. Energy Information Administration’s weekly storage report, traders are looking for a build of about 65 billion cubic feet (bcf) in the week-ended October 20.

Total natural gas in storage currently stands at 3.646 trillion cubic feet (tcf), according to the EIA. That figure is 179 bcf, or around 4.9%, lower than levels at this time a year ago and 35 bcf, or roughly 1%, below the five-year average for this time of year.

Analysts estimated the amount of gas in storage would end the April-October injection season at 3.8 tcf due primarily to higher liquefied natural gas shipments abroad. That would fall short of the year-earlier record of 4.0 tcf and the five-year average of 3.9 tcf.

Natural gas looks poised to breakout to the upside. The anticipated rally is coming a little early so don’t expect a long-term trend to develop. Traders should play the upside momentum and look for a short-term rally.