Natural Gas Price Fundamental Daily Forecast – Mass Liquidation Could Attract Bargain-Hunters

After last week’s steep sell-off and massive liquidation, natural gas futures are rebounding on Monday, mostly in response to oversold conditions. Some buyers may be responding to the bargain-basement price. Others may feel that last week-end’s cold spell that hit the East Coast of the U.S. may have been a little more than expected.

At 0856 GMT, January Natural Gas is trading $2.841, up $0.069 or +2.49%.

In other news, U.S. natural gas speculators cut their net long positions for a third week in a row on expectations supplies will be adequate this winter with storage near normal levels, output at record highs and forecasts for another warm winter.

Speculators in four major New York Mercantile Exchange (NYMEX) and Intercontinental Exchange (ICE) markets reduced their bullish bets by 50,966 contracts to 121,563 in the week to December 5, the U.S. Commodity futures Trading Commission said on Friday.

That was the first time speculators cut their net long positions for three weeks in a row since October.

Forecast

Last week, traders said the sell-off was fueled by a forecast for warmer temperatures starting December 15. In hindsight, it appears that someone may have known that the government report would show an expected storage build.

Oversold conditions and a continuation of the cold weather could underpin prices today. There is also always the possibility that the forecasts are wrong and that the return to warmer temperatures may not take place as expected starting on the 15^th.

Natgasweather.com is now saying that “There will be a brief break between cold shots Monday, with stronger ones arriving Tuesday to Friday. Overall, national demand will be high.”

The daily chart indicates that $2.720 is the next major downside target. However, if a support base forms, we could see a retracement into at least $2.983.

Remember that the first rally from a bottom is short-covering. The best rallies start with a support base and it’s going to take time to form one.