Natural Gas Price Fundamental Daily Forecast – No Bias Until Traders Determine End-of-Season Inventory

Natural gas futures are trading lower on Wednesday and inside yesterday’s trading range. The chart pattern suggests investor indecision and impending volatility. On Tuesday, the market spiked to the upside while posting a new high for the month. The move was fueled by aggressive short-covering in reaction to an updated weather forecast.

At 07:52 GMT, May natural gas futures are trading $2.856, down $0.016 or -0.56%.

The new forecasts showed a shift toward colder temperatures. This news spooked weak short-sellers enough to trigger the spike to the upside, but then the rally died as traders began to consider the start of injection season and its effect on upward momentum. Traders are now waiting for the next storage report to determine the next move in the market.

Short-Term Weather Outlook

According to NatGasWeather for March 19-March 25, “Overall, a messy pattern this week with a mix of weather systems with showers and cooling impacting most US regions, but with mild breaks between. The southern US will be mild to warm with highs of 60s to lower 80s, while mild to cool across the northern 2/3 of the country with highs of 30s to 50s. More impressive warming will take place this weekend with highs of 60s and 70s spreading out the southern US northward for lighter national demand. However, a weather system Tuesday-Wednesday will impact the East with showers and cooling. Overall, national demand will swing between moderate and high the next 7-days.”

Mid-Term Weather Outlook

“Colder trends were most notable with a weather system impacting a much greater portion of the eastern U.S. next week and also March 29-31, where numerous weather systems will impact the U.S., including again over the East,” according to NatGasWeather. “It’s still a very spring-like pattern due to a mix of strong spring weather systems that will bring heavy showers and powerful thunderstorms, but also with mild to warm breaks in between. It’s just the most recent data sees a little colder air with the systems, while also showing a greater impact over the eastern United States.”

Daily Forecast

We’re looking at a rangebound trade until traders get some clarity from this week’s U.S. Energy Information Administration (EIA) weekly storage report. The short-term range is $2.765 to $2.897. Its 50% level at $2.831 is controlling the short-term direction of the market. We could see a test of this level today.

With the market trading over the pivot at $2.831, the early bias is to the upside. Momentum will shift to the downside later today if the pivot fails as support.

Essentially, the near-term direction of the natural gas market will be determined by the size of end-of-season inventory. Currently, some traders are pricing in 1.08 trillion cubic feet, up from 950 Tcf the week before.