Natural Gas Price Fundamental Daily Forecast – Looking at Early January, Will Frigid Air Over Canada Stall at U.S. Border?

Natural gas prices are trading slightly higher early Tuesday, but the price action has had no effect on the downtrend. The current inside move suggests investor indecision and impending volatility. The early uncertainty is likely being caused by a slight change in the mid-term weather forecasts or technically oversold conditions.

Also remember that there is a major bottom on the February chart at $3.111. Some short-sellers may be booking profits as we approach that level. Furthermore, one cannot take any rally seriously until the gap created on Monday’s opening is filled. This gap is at $3.718 to $3.659.

At 1011 GMT, February Comex Gold is trading at $3.499, up $0.046 or +1.33%.

Short-Term Weather Forecast

According to NatGasWeather for the period December 18 to December 24, “Cool air will impact the Northeast into Wednesday with chilly lows of 10s to 30F. The rest of the US will be quite mild with highs of 40s to 50s across the North, with 60s and 70s across the South. A strong weather system will track across the southern US and up the East Coast Thursday – Saturday with rain and snow, just not very cold. High pressure will dominate most of the country with above normal temperatures late this weekend into next week, while the West will see weather systems with valley rains & mountain snows for a mix of mild and cool days. Overall, national demand will be low.

Mid-Term Weather Forecast

NatGasWeather is saying that there are ways colder Canadian air could push into the northern U.S. December 30 – January 1, but it needs more convincing data to make a genuine forecast.

“There will still be several strong weather systems impacting the U.S. over the next two weeks, such as one late this week that will sweep across the South and Southeast with rain and snow. But the main issue remains the same where U.S. weather systems just won’t be very cold as they fail to tap the frigid Arctic pool that remains too far north into Canada,” the firm said.

Forecast

The short-term trend is down and momentum is trending lower, however, the longer-term trend is up according to the daily/weekly/monthly charts.

Prices could stabilize because traders are starting to watch frigid air over Canada that may either stall at the U.S. border or push across aggressively during early January. We’re likely to see the first major reaction in the markets once this system hits the 15-day forecast. If it comes in as cold then prices are likely to rebound sharply if it catches a few of the weaker shorts off-guard.

Furthermore, EBW Analytics Group says that it will only take one or two weeks of very cold weather in January or February to offset the impact of the current warm weather spill. Translation:  Try to stay loose and don’t get too married to the short side.

However, if the short-term weather continues to be an issue then look for further weakness until at least Christmas.