Natural Gas Price Fundamental Daily Forecast – Pressured by Weak Balances, Supported by Supply Deficit

Natural gas futures are trading slightly lower on Tuesday. Monday’s price action and today’s early trade suggests investors have decided to hold prices in a range while they await the start of injection season which is expected to arrive in about two weeks. Essentially, looser balances are putting a lid on prices, while the storage deficit is helping to provide support.

At 11:49 GMT, May natural gas futures are trading $2.768, down $0.006 or -0.22%.

Bespoke Weather Services is crediting the storage deficits and colder trends with lifting prices on Monday. “Heading into expiry, we feel that prompt month prices likely remain stuck in the $2.70-$2.80 range given the battle we have between the downward pressure of weak balances and support offered by the storage deficit, combined with a weather pattern that, while not all that cold, is not decidedly bearish compared to normal,” Bespoke said.

Short-Term Weather Outlook

According to NatGasWeather for March 25 to March 31, “A quick cool shot will sweep across the Great Lakes and Northeast Tuesday-Wednesday with chilly conditions with highs of 30s and 40s then warming during the second half of the week. Most of the rest of the country will be mild to warm by still with weather systems, including the West and Southeast early this week, then the west-central US late week. Temperature-wise, the southern US will be pleasant with highs of 60’s to 80s, while mostly seasonal across much of the rest of the US with 40s to 60s. Overall, national demand will swing between moderate and high into next week.”

Mid-Term Weather Outlook

NatGasWeather says, “U.S. weather patterns remain relatively neutral through April 2^nd due to cool shots Tuesday-Wednesday across the Great Lakes to Northeast and then across the northern and central US March 31-April 2. However, the pattern continues to look increasingly bearish April 3-7^th, especially due to the European model showing widespread above normal conditions across the country with very light demand, such as the above image shows for April 6.”

Daily Forecast

Traders expect only two more weeks of withdrawals before the switch to injection season begins in the first week of April.

Based on current forecasts, traders are looking for a 28 Bcf withdrawal for the week-ending March 22 and a 21 Bcf pull for the week-ending March 29.

With these two pulls, we could be looking at the lowest volume in storage at the start of the injection season since it bottomed out at 824 Bcf March 28, 2014.

Technically, the main range is $2.592 to $2.897. Its 50% to 61.8% retracement zone is $2.745 to $2.709. Traders appear to be trying to establish support inside this zone. Monday’s low at $2.720 was formed inside this zone.

The new short-term range is $2.897 to $2.720. If traders decide to hold prices in a range then we could see a rally into its retracement zone at $2.808 to $2.829.