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Natural Gas Price Fundamental Daily Forecast – Short-Covering Fueled by Overnight Shift Toward Cold Dec. 15-21

By:
James Hyerczyk
Updated: Dec 7, 2022, 16:25 UTC

A shift in the overnight weather forecasts is the catalyst behind the early strength, but technical traders will tell you the market is oversold.

Natural Gas

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Natural gas futures are up over 4% on Wednesday, recovering nicely from a multi-month low reached the previous session. A shift in the overnight weather forecasts is the catalyst behind the early strength, but technical traders will tell you the market is oversold.

At 12:04 GMT, January Natural Gas futures are trading $5.688, up $0.219 or -4.00%. This is up from yesterday’s $5.337 low. On Tuesday, the United States Natural Gas Fund ETF (UNG) settled at $16.41, down $0.69 or -4.06%.

Overnight Recap

NatGasWeather said, “Nat gas prices are sharply higher in overnight trade after the GFS and EC reversed and trended 15-20 HDDs colder. It’s to no surprise the weather data trended colder after 5-straight days of warmer trends, although the amount it trended cooler by was likely more than the nat gas markets were expecting.

Most important, the overnight data trended colder for Dec. 15-21 by favoring frosty air over Western Canada and the U.S. Northern Plains advancing more aggressively south and eastward, thereby covering most of the U.S. with below normal temperatures.

But will the weather data finally hold a colder pattern for Dec. 16-21 after once showing a frosty pattern Dec. 1-15 only to trend notably warmer with it?”

Early Estimates for Thursday’s EIA Weekly Storage Report

Natural Gas Intelligence (NGI) is saying that storage data continued to trickle in for market observers on Tuesday, painting an even less supportive outlook for prices. Early storage withdrawal estimates have whittled down from last week, with the mild temperatures in the forecast likely to flip inventories back to a surplus to the five-year average within weeks.

NGI is modeling a 25 Bcf decline in stocks for the week-ending December 2. This compares with a 49 Bcf withdrawal in the similar year-ago period and the 59 Bcf five –year average.

Daily January Natural Gas

Short-Term Outlook

Traders are responding this morning to the change in the weather pattern. So far it’s only being fueled by profit-taking and short-covering. It’s still a little too early to think about a change in trend especially since there is no support base.

Furthermore, the market still has to fill the gap at 6.052 to 6.621 first before it will have a shot at the short-term target at $6.757 – $7.092.

Meanwhile, given the erratic weather pattern around Dec. 16-21, there is still risk to the downside. This means a plunge into the two main bottoms at $4.412 – $3.961 is still in play.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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