Natural Gas Price Fundamental Daily Forecast – Mild Weather, Virus-Related Demand Destruction Capping Gains

Nearby natural gas futures are trading mixed on Wednesday as mild weather and demand destruction from the COVID-19 crisis continued to weigh on prices.

At 10:18 GMT, May natural gas futures are trading $1.643, up $0.003 or +0.19%.

Global Forecast System Reinforces Milder Outlook

Natural Gas Intelligence (NGI) reported that the milder trends in recent forecasts have focused on the northern part of the country as “very nice early spring conditions set up across the Midwest and Northeast with highs of 60s from Chicago to New York City,” NatGasWeather said.

“The southern U.S. will remain quite comfortable going forward, with highs of 70s and 80s, nearly ideal for early spring, although occasionally getting a touch hot late next week as lower 90s attempt to gain coverage,” according to NatGasWeather.

“…Simply put, unless stronger cold shots return into the northern U.S., or hot conditions build across the southern U.S., weather patterns will maintain a bearish bias through mid-April. But again, there are many other factors strongly in play, highlighted by oil and gas production trends impacted by Covid-19 and oil price wars,” NatGasWeather said.

Mixed Signals for Supply and Demand

NGI said on Tuesday as the coronavirus pandemic hangs over the global economy, natural gas traders had to factor in potentially major impacts to both supply and demand.

“The natural gas market is in an interesting and unpredictable time right now,” analysts at Enverus said. On one hand, the collapse in crude oil prices and the resulting capital expenditure (capex) cuts “will lead to less associated natural gas supply. On the other hand, the Covid-19 pandemic has tens of millions of Americans under stay-at-home orders, so many businesses and industrial facilities are closed.”

“Ultimately, people staying at home will lead to less natural gas demand in the commercial and industrial sectors. As we are in shoulder season, demand is already low, as it’s too warm for residential heating but too cold for power burn demand.

Daily Forecast

The short-term range is $1.587 to $1.782. Its 50% level or pivot is $1.685. Trader reaction to $1.685 will set the tone for the day.

Look for a bullish intraday bias on a sustained move over this level. If this can create enough upside momentum then there’s an outside chance of a test of $1.782.

A sustained move under $1.685 will signal the presence of sellers. This could lead to a retest of the 25-year low at $1.587.