Natural Gas Price Fundamental Daily Forecast – Prices Gap Lower on Bearish Weather Concerns

Natural gas futures gapped lower on both the daily and weekly charts on Monday. This could mean that a few of the strongest longs have finally thrown in the towel on a bull market this year. The trend is down on the daily chart and today’s early price action suggests sellers may take a run at the November 2, 2018 main bottom at $2.890. This would essentially wipe out the entire rally since the start of the winter heating season.

At 1529 GMT, March Natural gas futures are trading $2.978, down $0.170 or -5.40%.

At this time, the key factors controlling the price action are the short-term weather outlook and heating demand. Needless to say, they move together.

According to NatGasWeather for December 31 to January 6, “A weak cool front will bring chilly conditions over New England to open the week, but quite mild over the rest of the east-central and southern US even as a weather system strengthens over Texas and the South with increasing rains, just without cold air. A more impressive cold blast will bring snow to the Rockies and Plains, with cold air into North Texas as well as highs only reaching the 0s to 30s. Cold air with this Plains system will sweep across the Great Lakes and Northeast during the second half of the week for stronger national demand.”

Traders are looking for cold to return next weekend, however, based on the current price action, it looks as if they don’t expect it to last very long. We could see a few periodic short-covering rallies, but without a support base, these rallies are likely to be short-term in nature.

It’s also possible that sellers will continue to dominate the trade unless a longer-term forecast shows the return of significant cold in mid-to-late January or early February. Otherwise, we likely to see a sideways-to-lower trade over the near-term with room for periodic short-covering rallies due to technically oversold conditions.