Natural Gas Price Fundamental Daily Forecast – Needs to Hold $3.679 to Sustain Growing Upside Momentum

Natural gas futures are inching higher Friday but gains are being limited despite strong gains in the natural gas forward curves for the December 31-January 5 time period. Traders also appear to be downplaying plunging temperatures, soaring demand and falling production.

Additionally, traders seem to be unable to overcome Thursday’s latest government storage report that showed ample supplies and relatively modest early-winter heating demand.

At 11:36 GMT, March natural gas futures are trading $3.730, up $0.060 or +1.63%.

Energy Information Administration Weekly Storage Report

U.S. natural gas futures fell on Thursday 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.

According to NGI, ahead of the EIA report, a Reuters’ poll of analysts, whose estimates ranged from withdrawals of 83 Bcf to 31 Bcf, landed at a median expectation of 50 Bcf. A Bloomberg survey generated a similar range and median withdrawal estimate of 55 Bcf. NGI is modeling a 50 Bcf withdrawal.

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 Weather Forecast

According to NatGasWeather for January 7-13, “Frigid air over the Midwest, Great Lakes, and Northeast will result in strong national demand today as lows this morning are frosty and in the -20s to 20s. After a brief milder break over much of the U.S. this weekend, another cold shot will track across the Midwest and East early next week with rain, snow, and lows of -20s to 30s for another round of strong demand.

Warmer conditions will return mid and late next week with highs of 40s to 70s over much of the U.S. besides the colder Midwest.

Overall, national demand will be high through Tuesday then easing mid-next week.”

Daily Forecast

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.

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.