Natural Gas Price Fundamental Daily Forecast – New Forecast Calls for Average/Above Average Temps Up to November 23

Natural gas futures continued to rally on Thursday despite a government report which showed a larger-than-expected build in storage stocks.

January Natural Gas futures closed at $3.297, up $0.025 or +0.76%.

According to the U.S. Energy Information Administration, domestic supplies of natural gas rose by 15 billion cubic feet for the week-ended November 3. This figure exceeded expectations from S&P Global Platts which called for an increase of 12 Bcf. However, it matched the Reuters estimate of 15. Others had the estimate as low as 8 Bcf and as high as 24 Bcf.

The EIA report also showed stocks totaled 3.790 trillion cubic feet, about 2% below the five-year average.

According to Platts, this week’s rally has been supported by below-average temperatures in several key demand areas. Demand in these areas hit 17.5 Bcf/d, about 4.3 Bcf/d above the previous seven-day average.

Overall U.S. demand is expected to hit 88.65 Bcf/d Thursday, a level not seen since March 16, when demand topped 90 Bcf/d in the final weeks of the winter season.

Finally, demand levels throughout the first 10 days of November averaged 76.5 Bcf/d, nearly 9.7 Bcf/d above the same strip in November 2016, putting the market in the position to see a withdrawal in the upcoming storage report.

Forecast

Natural gas futures are trading higher early Friday. Some of the move is related to the fundamental data, but I believe most of the move is being generated by technical factors.

At 0754 GMT, January Natural Gas is trading $3.317, up 0.020 or 0.61%.

Technically, the market is gaining strength. The close over a key retracement zone at $3.271 to $3.216 indicates the buying is getting stronger. This area is new support.

A trade through $3.316 will change the main trend to up on the daily chart. This could lead to a move into another main top at $3.350. This price may be the trigger point for an acceleration to the upside.

The daily chart indicates there is plenty of room to the upside if $3.350 is taken out with conviction. This could trigger a further move into the September 19 main top at $3.450.

The next move in the market will be determined by the weather. Forecasts for colder temperatures over the next two weeks helped fuel the rally. However, the latest eight to 14-day forecasts from the U.S. National Weather Service projects average to above-average temperatures over key winter demand markets of Chicago and New York City up to Thanksgiving.

The change in the weather forecast may give investors an excuse to begin taking profits. Be careful buying strength and start watching for a potentially bearish closing price reversal top, or higher-high, lower-close.