Natural Gas Price Fundamental Daily Forecast – Return of Milder Temperatures Could Trigger Steep Break into $2.905 Over Near-Term

Natural gas futures rallied on Tuesday to its highest level since June 18 as investors continued to price in expectations for increased demand during the next eight to 14 days because of the arrival of colder temperatures. The strong performance has put the market in a position to breakout over $3.064. However, buyers may run into resistance at $3.085 at least temporarily.

Early Wednesday, the market is under a little pressure. At 0655 GMT, November Natural Gas is trading $3.045, down $0.013 or -0.43%.

Forecast

On Monday and early Tuesday, traders were pricing in colder temperatures over the next 8 to 14 days. However, there are signs that this cold front may be weakening.

According to the NatGasWeather midday Global Forecast System (GFS), data on Tuesday added some demand for the upcoming weekend, but maintained milder trends to drop demand expectations for next week.

“The GFS was also quite a bit milder across the northern U.S.,” with the period from October 5 to October 8 likely to lose numerous heating degree days (HDD), the firm said. “The GFS still sees cool blasts into the northern U.S., just more over the Rockies and Plains instead of the Midwest and further eastward.” The latest GFS is now “closer to the milder” European model that had been more bearish for the period heading into Tuesday’s session.

Bespoke Weather Services said “we are increasingly confident that prices will set a short-term high this week, as the first signs of demand-side loosening became more apparent today and production continued to set record highs.”

We’re going to forecast heightened volatility at this time because of the changing weather forecast.

If the services continue to push for cooler temperatures then the bears will continue to cover with upside targets $3.085.

If the forecast shifts towards milder temperatures then we could see a violent break over the near-tem into $2.905 to $2.867.