Natural Gas Price Fundamental Daily Forecast – Sellers Driven by Bearish European Weather Model

Natural gas futures are trading sharply lower early Wednesday as investors price in another change in the weather forecast for later in the month. The steep break puts the market in a position to challenge last week’s low. According to Natural Gas Intelligence, the American weather model is supportive, but the European model indicates milder temperatures ahead.

At 10:19 GMT, April natural gas futures are trading $2.625, down $0.080 or -2.96%.

“The overnight weather models were mixed heading into Tuesday’s session, with the Global Forecast System (GFS) little changed but with the European model losing numerous heating degree days,” according to NatGasWeather.

“The main difference is the GFS is colder by favoring a weaker and shorter break over the East around February 23, and is also more aggressive with cold returning across the East February 24-27,” NatGasWeather said.

Additionally, the European weather model is now looking for milder weather for February 23-27. “One of these models is wrong, and the overnight data will be watched closely to see which one gives in to the other,” NatGasWeather said.

Short-Term Weather Outlook

NatGasWeather is saying for February 13-19, “A fast moving weather system will bring rain, snow and ice across the East today, followed by a milder break late in the week. The West will be cool to cold and unsettled. The southern US will be mild to warm with highs of 60s to 80s, although cooling Friday-Saturday. This week-end and next week will be quite chilly as cold air sweeps across much of the country with lows of -10s to 20s North and 20s to 40s over the South. Overall, national demand will be moderate through Thursday, then high Friday through next week.”

Weekly Natural Gas Storage Report

This week’s U.S. Energy Information Administration’s weekly storage report is expected to show a draw of 79 Bcf for the week-ending February 8.

Other News

“The US Energy Information Administration on Tuesday scaled back its first quarter 2019 estimates for natural gas production and consumption, but continued to expect that record production over the next two years will take the edge off natural gas prices and allow gas to grow its share of the generation mix,” S&P Global Platts reported.

Daily Forecast

Wednesday’s early price action indicates the market is still bearish. The price action indicates that traders are favoring the milder European model at this time. This model is calling for milder weather February 23-27.

Technically, the trend is down. The short-term range is $2.565 to $2.730. The mid-point of this range at $2.648 is controlling the direction of the market. Currently, the April natural gas futures contract is trading below this level, giving it today’s downside bias. If the downside momentum continues then look for the selling to possibly extend into last week’s low at $2.565.

Prices could accelerate to the downside if the GFS weather model flips and joins the European model in forecasting milder weather later this month. We could see a short-covering rally if the European model reverses its current bearish outlook.

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