Natural Gas Price Fundamental Daily Forecast – Rally Capped by Rising Production, Lower Demand, Return of Mild Weather

Natural gas prices are trading lower early Monday as the week-long consolidation continues. Speculative buyers may be trying to prop up the market in anticipation of this week’s cold snap that may lead to one more week of storage withdrawals before the spring injection can officially begin.

At 1118, May Natural Gas futures are trading $2.677, down $0.024 or -0.89%.

To recap last week, the market finished 1.17% lower, mostly in reaction to expectations of rising production, falling demand and the return of mild temperatures.

According to the Energy Information Administration, U.S. natural gas stocks decreased by 29 billion cubic feet for the week-ending March 30. Analysts were expecting a storage withdrawal of around 29 billion cubic feet. The five-year average for the week is a withdrawal of 28 billion cubic feet, and last year’s storage increase for the week totaled 2 billion cubic feet.

Total U.S. stockpiles fell week over week to 34% below last year’s level and are now 20.4% below the five-year average.

The EIA also reported that U.S. working stocks of natural gas totaled about 1.354 trillion cubic feet at the end of last week, around 347 billion cubic feet below the five-year average of 1.701 trillion cubic feet and 697 billion cubic feet below last year’s total for the same period. Working gas in storage totaled 2.051 trillion cubic feet for the same period a year ago.

Forecast

According to NatGasWeather.com for the April 9 – 15 period, “Cool conditions will cover the northern U.S. to open the week, aided by a reinforcing cold shot Monday across the Midwest into the Ohio Valley with light rain and snow. With lows of teens to 30s across the northern U.S. the next few nights, including 30s into the Southeast, national demand will be stronger than normal.”

“The West and far southern U.S. will be mostly mild to warm with highs of 60s to 80s for regionally lighter demand. The eastern half of the country will warm Wednesday to Friday as high pressure arrives with highs near 70F as far north as Chicago to NYC.”

“However, strong demand will return next week-end as a weather system tracks into the east-central U.S. Overall, demand will be high early this week and next weekend, and light in between.”

Technically, the focus will be on the short-term range and the intermediate range and their respective retracement levels. These levels are controlling the price action and the direction of the market.

The short-term range is $2.610 to $2.764. Its 50% level or pivot is $2.687. The market is currently straddling this level. Trader reaction to the pivot will likely determine the direction of the market today.

A sustained move under $2.687 will give it a downside bias with major support at $2.610 to $2.600.

A sustained move over $2.687 could trigger a short-covering rally into the intermediate retracement zone at $2.720 to $2.747.