Natural Gas Price Fundamental Daily Forecast – Market Testing Major Technical Retracement Area

Natural gas prices plunged to their lowest level in four sessions on Thursday on a drop in demand due to an uptick in temperatures.

According to Platts, “Although the cold weather persisted Wednesday, it was warmer than earlier in the week, driving down demand. U.S. demand Wednesday checked in at 123.7 Bcf/d, down 9 Bcf/d from Tuesday and the lowest since Saturday’s consumption of 118.4 Bcf/d.”

On Thursday, February Natural Gas settled at $2.88 or -0.128 or -4.26%.

Natural gas was also pressured by a weekly government report showing that natural gas supplies in storage in the U.S. declined less than expected last week.

According to the U.S. Energy Information Administration, natural gas storage in the U.S. fell by 206 billion cubic feet in the week-ended December 29, while analysts had forecast a decline of 221 billion.

That compared with a draw of 112 bcf in the preceding week and represented a decline of 192 billion from a year earlier and was also 192 bcf below the five-year average.

The EIA report also showed that total U.S. natural gas storage stood at 3.126 trillion cubic feet, 5.8% lower than levels at this time a year ago and also 5.8% below the five-year average for this time of year.

Forecast

At 0814 GMT, February Natural Gas is trading $2.808, down 0.072 or -2.50%.

The short-term range is $2.562 to $3.097. Its 50% to 61.8% retracement zone is $2.830 to $2.766. The market is currently testing this zone. Trader reaction to this zone will determine the next move by the market.

Since the trend is up, buyers may come in on a test of this zone since it also represents a value area. They are going to try to produce a potentially bullish secondary higher bottom.

If the buyers don’t show up to defend the trend then look for sellers to try to drive the market through $2.766 in an effort to challenge the main bottom at $2.562.

Remember, the professionals are not trading the current cold spell. They are looking ahead 10 to 14 days. It’s that forecast that will determine whether this current break draws the attention of buyers and stops inside the retracement zone.