Natural Gas Price Fundamental Daily Forecast – Rangebound; Bullish Over $2.922, Bearish Under $2.830

Natural gas prices are trading higher on Wednesday but giving back earlier gains. Investors are still adjusting positions after last week’s steep sell-off ahead of Thursday’s U.S. Energy Information Administration’s weekly inventories report. Traders are also looking at longer-term weather forecast to determine if another cold front is on the way, given the depleted supply.

At 1301 GMT, February Natural Gas futures are trading $2.933, up $0.010 or +0.34%. Earlier in the session, the market hit $2.989. The market has now clawed back more than 50% of the correction from $3.097 to $2.746. This figure is $2.921.

In its latest Natural Gas Weekly Update, the U.S. Energy Information Administration said that freezing weather through and coming off the New Year’s holiday weekend drove total demand to an all-time high estimated at 150.7 billion cubic feet on January 1, surpassing the previous single-day record set in 2014.

In weather news, the National Weather Service’s six-to-10-day forecast shows a large swath of below-average temperatures across most of the Midwest and south-central U.S. flanked by bands of average temperatures enveloping nearly the entire Eastern Seaboard and parts of the west-central U.S., as above-average temperatures hold over the entire West and fringes of the west-central U.S.

In the eight-to-14-day forecast, above-average temperatures overtake nearly the entire country.

Another short-term forecast for January 8 to January 14 from NatGasWeather.com, calls for national demand to ease from high to moderate.

Forecast

Thursday’s EIA storage report is expected to show a draw of 320 billion cubic feet to 345 billion cubic feet. The number is large as well as the range. Therefore, the margin of error could also be large. Not only are traders adjusting positions to reflect this large number, but they also have to determine a game plan if the number misses to the upside or misses to the downside.

The daily chart indicates the market is caught between a series of retracement levels due to the recent volatile swings. At this time, natural gas is trading nearly in the middle of two recent swings. This indicates investor indecision and impending volatility.

The main range is $2.562 to $3.097. Its 50% level is $2.83.

The short-term range is $3.097 to $2.746. Its 50% level is $2.922.

The sweet spot on the chart is $2.830 to $2.922. Trader reaction to this zone will determine the near-term direction of the market.

I’m going to have an upside bias on a sustained move over $2.922 and a downside bias on a sustained move under $2.830. Sitting inside this zone will mean investors aren’t sure how to play this market and would rather wait for the EIA report and an updated weather report.