Natural Gas Price Fundamental Daily Forecast – Speculators Found Support Inside Key Retracement Zone

Natural gas prices closed slightly better on Monday as investors demonstrated respect for a key technical support area on the daily chart. The catalysts behind the price action were expectations of a record storage draw in this week’s government storage report. A mixed weather forecast may have limited gains.

February Natural Gas futures settled at $2.835, up $0.040 or +1.43%.

In its latest Natural Gas Weekly Update, the U.S. Energy Information Administration said that freezing weather through and coming off the New Year’s holiday weekend drove total demand to an all-time high estimated at 150.7 billion cubic feet on January 1, surpassing the previous single-day record set in 2014.

In weather news, the National Weather Service’s six-to-10-day forecast shows a large swath of below-average temperatures across most of the Midwest and south-central U.S. flanked by bands of average temperatures enveloping nearly the entire Eastern Seaboard and parts of the west-central U.S., as above-average temperatures hold over the entire West and fringes of the west-central U.S.

In the eight-to-14-day forecast, above-average temperatures overtake nearly the entire country.

Another short-term forecast for January 8 to January 14 from NatGasWeather.com, calls for national demand to ease from high to moderate.

Last week’s price action suggests investors may have priced in these forecasts. I suspect the next major market-moving report will be the one that covers the end of January/beginning of February.

Forecast

Looking ahead to Thursday’s EIA storage report, traders are looking for a draw of about 300 Bcf.

The market is up on Tuesday. At 0923 GMT, February Natural Gas futures are trading $2.918, up $0.083 or +2.96%.

Unless there is another wave of extremely cold temperatures, we may not see a powerful rally in the February futures contract. However, the daily chart indicates investors are showing respect for a key support area at $2.830 to $2.766.

The key to sustaining the developing rally is for the market to overcome layers of potential resistance levels at $2.886, $2.941, $2.962 and $3.030. The trigger point for a possible acceleration to the upside is $3.097.

The record drawdown could cause shortages in the near future if extremely cold weather returns and at the start of the summer cooling season. Therefore, longer-term investors may want to stay away from the nearby futures month and trade the deferred contracts for a better chance at a sustainable rally later this year.