Natural Gas Price Fundamental Daily Forecast – Ripe for Short-Covering Rally, but Near-Term Outlook is Bearish

Natural gas futures are edging lower early Tuesday after yesterday’s short-covering rally produced a modest gain. Helping to underpin prices was a rebound in the spot market and liquefied natural gas. Gains may have been capped by forecasts calling for lower domestic demand because of the outlook for mild spring temperatures

At 06:26 GMT, April natural gas futures are trading $2.766, down $0.011 or -0.40%.

Short-Term Technical Analysis

On Monday, the market formed its first higher-low in eight sessions after making seven straight lower-lows. This could be a sign that the selling pressure that has been controlling the market since February 18 may finally be letting up.

The first rally after a prolonged sell-off is usually fueled by short-covering. This move is often equal to 50% to 61.8% of the last break. The current range is $3.060 to $2.697. This makes its retracement zone at $2.878 to $2.921 the primary upside target.

If the selling pressure continues then look for a break into the more than two month retracement zone at $2.684 to $2.595. We could see profit-taking on a test of this area or the start of a short-covering rally.

Supported by Strength in Spot Prices

Natural Gas Intelligence (NGI) said chilly near-term conditions propped up spot gas prices. NGI’s Spot Gas National Average gained 32.0 cents to $2.965.

NGI also reported that spot gas prices climbed on Monday across the Lower 48 along with cooler temperatures over parts of the nation’s midsection and in the East.

NatGasWeather said the bump in national demand was expected to continue through Tuesday, “As a weather system impacts Texas and the southern Plains with showers, while a colder system sweeps across the Great Lakes, Ohio Valley and Northeast with lows of 0s to 30s.”

LNG Feed Gas Volumes Climb

LNG feed gas volumes climbed above 10 Bcf early on Monday, marking substantial progress in the recovery from declines imposed by the deep freeze in Texas that crippled the Gulf Coast energy sector for days.

LNG volumes, prior to the Texas cold snap, had topped 11 Bcf on several days over the span of weeks as U.S. exporters met robust demand from Asia and parts of Europe during the peak of winter.

Short-Term Outlook

Bespoke Weather Services noted the renewed LNG momentum as a key positive. But the firm said futures in March would need some help on the weather front to drive another round of heating demand before spring conditions settle in for good. While the week ahead is expected to generate some demand increases, the forecaster said, the mid-range outlook is notably bearish.

The firm said the first half of March, overall, is projected to be warmer than normal – compared with both the five-year average and long-term historical averages.

Technically, April natural gas futures could be ripe for a short-covering rally, but this is likely to turn into another shorting opportunity unless the second half of March shifts to cooler.