Natural Gas Price Fundamental Daily Forecast – Sharply Lower as American Model Turns Bearish Overnight

Natural gas futures are trading lower on Wednesday after a two-day rally suddenly ended following the release of fresh weather forecasts calling for milder temperatures. Forecasts shifted warmer overnight, mostly attributable to changes in the American model, according to Bespoke Weather Services.

At 14:52 GMT, January natural gas futures are trading $5.082, down $0.188 or -3.57%.

Arrival of Cold is Just a Guess at This Time

The American model may have moved toward warmer temperatures, but the latest outlook from the European dataset “was essentially flat to yesterday afternoon’s warmer run, although the ending looked a little less threatening as far as cold risk is concerned,” Bespoke said.

“Ultimately, a normal pattern is probably bearish for prices at these levels, but with so much winter ahead of us, we cannot remove the risk premium associated with a colder scenario,” Bespoke said. “As such, it is tougher to guess what price action will do here and now until the pattern can cleanly break one way or the other, and with signals mixed currently that could take a while.”

Support from Strong LNG Export Demand

LNG feed gas volumes held steady the first two days this week, with export destinations in Europe in particular clamoring for U.S. gas amid a supply shortage on that continent, NGI wrote. One reason for the renewed demand for U.S. LNG is doubt Russia will be able to fulfill its promise to supply Europe with enough gas for winter.

Early Look at Thursday’s US Government Storage Report

The early estimates ahead of Thursday’s Energy Information Administration (EIA) weekly storage report call for a late-season injection.

According to NGI, Bespoke modeled a 25 Bcf increase for the week-ended November 12. NGI estimated a build of 23 Bcf. Last year, the EIA recorded a 28 Bcf build. The five-year average is for a withdrawal of 12 Bcf.

Daily Forecast

The main range is $4.009 to $6.667. The market is currently trading inside its retracement zone at $5.338 to $5.024. Natural gas has been consolidating around this area for about five days which may be suggesting investors are finding value.

Look for an upside bias to develop on a sustained move over $5.338. If this creates enough upside momentum, we could see a surge into $5.739 – $5.958.

A sustained move under $5.024 will be a sign of weakness. This could lead to a retest of $4.811. This price is a potential trigger point for an acceleration to the downside with $4.009 the nearest major target.

With weather data lowering demand expectations for the November 26-December 2 storage week, our bias will be to the downside until there is a verified breakout over $5.338.