Natural Gas Price Fundamental Daily Forecast – Multiple January Cold Blasts Underpinning Prices

Natural gas futures edged higher on Friday as speculators shrugged off the previous day’s inventory report and focused instead on robust heating demand, as well as weather forecasts calling for additional blasts of freezing temperatures later in the month.

On Friday, March natural gas futures settled at $3.726, up $0.056 or +1.53%.

Late January Cold Blast Enters Picture

According to Natural Gas Intelligence (NGI), “the latest weather on Friday trended colder overall for the final third of January. This would build on a frigid start to the month that included subzero temperatures during the first trading week of the year in the Upper Midwest and snowstorms across much of the East and as far south as Tennessee.”

NatGasWeather Short-Term Outlook

NatGasWeather noted Friday that weather outlooks early this year have been erratic. However, “the pattern is still the best it’s been so far this winter season as a frigid blast is currently driving strong national demand.”

Another round of bitter cold is expected early in the week ahead “with a similar track” that would begin with icy conditions in the Midwest before moving to the East, the forecaster said. Later in January, the firm added, another blast of cold air is expected to descend from Canada into the northern United States.

Energy Information Administration Weekly Storage Report

U.S. natural gas futures recovered on Friday following a slightly weaker trade the previous session on a smaller than expected storage draw and forecasts for less cold weather and lower heating demand next week.

The U.S. Energy Information Administration (EIA) said U.S. utilities pulled just 31 billion cubic feet (bcf) of gas from storage during the week-ended December 31, the smallest withdrawal from storage in December since 2018.

This EIA report was expected to show a 55 Bcf withdrawal for the week-ending December 31. In the year-earlier period, the government recorded a 127 Bcf pull, while the five-year average is a draw of 108 Bcf.

Last week’s withdrawal reduced stockpiles to 3.195 trillion cubic feet (Tcf), or 3.1% over the five-year average of 3.099 Tcf for this time of year.

Short-Term Outlook

March natural gas prices have been in a trading range for nearly a month. This suggests stubborn bulls are propping up the market in the hopes of a lingering cold pressure dome. Unfortunately, the forecasts have alternated between cold and warm, preventing any solid rally from gaining traction. However, traders are now betting that multiple cold blasts throughout the month could be the catalysts to trigger the start of a near-term breakout.

Technically, the main trend is down. The main range is $3.941 to $3.416. The market is currently trading on the strong side of its 50% level at $3.679, suggesting there may be a little weather demand in the market on Friday.

The nearest resistance is $3.912, $3.941 and $3.964. Overcoming the latter could trigger a strong short-covering rally into $4.378, but in order to get there, any cold system is going to have to last more than days.

Crossing to the weak side of the pivot at $3.679 will indicate the presence of sellers. If this creates enough downside momentum then look for a move into $3.416. If this fails, the selling could extend into $3.186.