Natural Gas Price Fundamental Daily Forecast – Looking for Minimum Retracement into $2.906

Natural gas futures rebounded on Monday after the weather services put cold temperatures back in the forecast.

On Monday, February natural gas settled at $2.755, up $0.120 or +4.55%.

According to natgasweather.com for the period December 18 to December 24, “High pressure will dominate much of the country through Thursday with above normal temperatures and light demand. A quick cool shot will sweep across the Northeast Wednesday, then warming back above normal after. Frigid air will pour across the western and central U.S. late in the week with very cold temperatures and strong demand as lows reach -15 degrees F to 20 degrees F. Overall, national demand will be moderate to low through Friday then high.”

Traders said on Monday that a new 8 to 14 day forecast from the National Oceanic Atmospheric Administration (NOAA) called for the return of colder than normal weather to cover most of the U.S.

Forecast

At 1104 GMT, February natural gas futures are trading $2.756, up 0.001 or +0.04%.

Monday’s rally was long overdue and offered little surprise. The recent price action suggested the market was running out of short-sellers. Without aggressive short-sellers to push the market lower, buyers took control, driving prices higher. The buying may not have been new longs entering the market. In fact, it was probably profit-takers.

If open interest falls and prices rise then this is a sure indication that short-sellers are leaving the market rather than new buyers entering the market.

The current short-term range is $3.210 to $2.602. If the short-covering rally continues this week then look for a rally into $2.906 to $2.978. Since the main trend is down, a move into this area is likely to attract new sellers.

The current chart pattern also suggests that professional traders are not willing to short at such low levels, but would rather wait until some of the weaker shorts have been driven out before establishing new short positions.