Natural Gas Price Fundamental Daily Forecast – Strengthens Over $1.745, Weakens Under $1.720

Natural gas futures are under pressure early Friday after posting an outside move, lower close the previous session. Despite the steep two day plunge, the market is still up after posting three days of solid gains earlier in the week. Three factors are contributing to Friday’s weakness:  worries over the coronavirus’ impact on the U.S. economy, a weaker-than-expected draw in the weekly U.S. Energy Information Administration’s (EIA) weekly storage report and strong technical resistance.

At 06:52 GMT, April natural gas futures are trading $1.746, down 0.026 or -1.47%.

Coronavirus Impact

Natural gas prices could feel further downside pressure if OPEC and its allies agree to reduce production about 1.5 million barrels per day as proposed. A plunge in crude oil production paired with a supply glut and mild weather is likely to keep a lid on natural gas prices while putting it in a position to hover around multi-year lows.

U.S. Energy Information Administration Weekly Storage Report

The EIA reported Thursday that domestic supplies of natural gas fell by 109 billion cubic feet for the week-ended February 28. A Reuters poll showed a withdrawal of 108 Bcf for the week-ended February 28, while a Wall Street Journal survey showed a 109 Bcf pull. Bloomberg estimated a median withdrawal of 110 Bcf. NGI’s model predicted a 106 Bcf withdrawal.

Last year, EIA recorded a 152 Bcf withdrawal for the similar week, and the five-year average pull of 106 Bcf.

Total stocks now stand at 2.091 trillion cubic feet, up 680 billion cubic feet from a year ago, and 176 billion cubic feet above the five-year average, the government said.

Short-Term Weather Outlook

NatGasWeather for March 6-11 says, “A weather system with heavy showers will track across the South and Southeast the next few days, although with only modest cooling as highs still reach 50s to 70s. The northern US remains milder than normal with highs of 40s and 50s, locally 30s.

However, a quick cold shot will sweep across the Midwest and East Friday through Saturday with lows of 10s to 30s for a modest bump in national demand. Mild conditions with highs of 40s to 80s will return to rule most of the US late this weekend through next week for a return to very light demand. Overall, light versus normal demand the next 7-days, just slightly better Friday through Saturday.

Daily Forecast

Technically, the main trend is down according to the daily swing chart. A trade through $1.847 will change the main trend to up. A move through $1.642 will signal a resumption of the downtrend.

The main range is $2.204 to $1.642. Its 50% to 61.8% retracement zone stopped the rally at $1.847 on Thursday.

The short-term range is $1.642 to $1.847. Its retracement zone at $1.745 to $1.720 is currently being tested. Trader reaction to this zone will determine the short-term direction of the natural gas market.

Aggressive counter-trend buyers could come in on a test of $1.745 to $1.720. They are going to try to form a potentially bullish secondary higher bottom.

Sellers are going to try to take out the short-term retracement area. This move would solidify the strength of the new main top at $1.847 and set up a possible retest of the last main bottom at $1.642.