Natural Gas Price Fundamental Daily Forecast – Oversold Conditions Fueling Short-Covering Rally

Weather concerns drove natural gas prices sharply lower on Friday, producing its biggest price slide since late February. According to the government’s Global Forecast System weather model, temperatures are expected to remain “much too warm” through December 6. This will have a direct impact on near-term demand.

January Natural Gas settled at $2.916, down $0.143 or -4.67%.

Forecast

The thought that last week’s sell-off may have been overdone is helping to boost natural gas prices early Monday. However, traders don’t expect the rally to amount to much unless there is a major change in the weather pattern.

At 1029 GMT, January Natural Gas is trading $3.017, up 0.101 or +3.46%.

Looking ahead to November 27 to December 3, NatGasWeather.com is saying, “A cool shot will linger over the northeastern U.S. to open the week with highs only in the 30s and 40s, but warming mid-week. The central and southern U.S. will be mild to warm with highs of 60s to 80s due to unseasonably strong high pressure.

The West will see fresh weather systems arrive with valley rains and mountain snows. Much of the country will be milder than normal late in the week and next weekend apart from portions of the Upper Great Lakes & Northeast.

Overall, demand will be moderate to occasionally low.”

The weather forecast is not very promising for bullish investors at this time. Although the downside may be limited due to oversold conditions, I don’t think any rally is going to gain traction until there is a long, lingering arctic cold spell.

“Cold blasts” may produce short-covering rallies, but this market needs sometime longer-term to get prices out of the hole. Right now, this is not in the forecast

The short-term range is $3.321 to $2.903. A meaningful short-covering rally could drive prices into a retracement zone at $3.112 to $3.161 over the near-term. However, since the main trend is down, a test of this zone is likely to attract new sellers.