Natural Gas Price Fundamental Daily Forecast – Needs to Break Hard to Take Out Lingering Long Speculators

Natural gas futures are taking another hit on Friday shortly before the opening despite another healthy draw down in inventories as the winter heating demand season ends and the mostly neutral spring season begins.

At 1026 GMT, May Natural Gas is trading $2.649, down $0.007 or -0.26%.

Traders are still responding to yesterday’s U.S. Energy Information Administration’s weekly storage report which showed that domestic supplies of natural gas dropped by 86 billion cubic feet for the week-ended March 16. This was in line with forecasts from S&P Global Platts which called for a decrease of 87 billion. The consensus estimate was for a draw of about 91 Bcf.

Additionally, the report showed that total stocks now stand at 1.446 trillion cubic feet, down 667 billion cubic feet from a year ago, and 329 billion below the five-year average, the government said.

Forecast

Friday’s session will begin with the May Natural Gas futures contract under pressure. The daily chart pattern suggests that downside momentum is building, setting up a possible challenge of the February 12 bottom at $2.600 over the near-term. This price is a potential trigger point for an acceleration to the downside as the final liquidation break of the season could fuel an acceleration into $2.504.

This anticipated move is being designed to wipe out the lingering bullish traders who are still hanging around. While it may begin to look ugly on the charts, it often clears the way for new buyers to come in and establish positions at very favorable price levels ahead of the summer cooling-demand season.

I don’t think weather is going to be too much of a concern over the next month or two so any price action, or base-building taking place will be related to the anticipation of greater demand in late April and May.

The key resistance levels at this time are $2.688, followed by $2.716. I don’t think we’re going to see a meaningful short-covering rally unless the buying is strong enough to overcome $2.716.