Natural Gas Price Fundamental Daily Forecast – Short-Term Outlook Does Not Favor Strong Gas Demand

Natural gas futures are trading higher late in the session on Tuesday, but the inside price move on the daily charts indicates only investor indecision and impending volatility. The price action doesn’t suggest a potential trend trade and most likely represents traders waiting for the next shoe to drop on the weak market.

Furthermore, losing ground eight out of nine sessions usually indicates the market is in the hands of strong short-sellers. That may be the case fundamentally, but there’s always the possibility of a technical reversal to the upside just to alleviate some of the downside pressure. This move isn’t likely to change the trend to up either, but could be designed to give bears a better price to re-enter new short positions.

At 17:23 GMT, May natural gas futures are trading $2.566, up 0.043 or +1.70%.

Fundamentally, the short-term outlook remains bearish with forecasts calling for spring weather and tapered heating needs over the remainder of this month and into April, according to Natural Gas Intelligence (NGI).

Short-Term Weather Outlooks

Bespoke Weather Services on Monday cited “notable declines” in gas-weighted degree days (GWDD) in its updated forecast for the remainder of March, with a warming trend developing next week for the Midwest and East.

“In total, our 15-day forecast is a full 15 GWDDs warmer than our forecast from Friday afternoon, solidly warmer than both the long-term normal and the five-year normal,” Bespoke said. “Our projection for total March GWDDs is now much closer to that of last year, another very warm March. Longer-range signals still favor the warmer-than-normal state rolling on into the month of April as well, which keeps weather on the bearish side.”

EBW Analytics Group said the warmer outlook cut “projected demand for natural gas by more than 50 Bcf” and effectively shattered “hopes for another cool shot” before the end of March.

Short-Term Forecast

With “modest” storage withdrawals on tap for the next three weeks, the EBW analysts said the April contract could potentially drop as low as $2.390.

Bespoke issued a preliminary estimate of a 10 Bcf withdrawal for this week’s storage report. It looks for one more draw with next week’s print before injection season could get underway.