Natural Gas Price Fundamental Daily Forecast – Strengthens Over $2.747, Weakens Under $2.720

Natural gas futures are trading slightly better early Monday, but the price action is being effected by low volume. The market is trading inside Thursday’s range which suggests investor indecision and impending volatility.

At 0741 GMT, May Natural Gas is at $2.739, up $0.006 or +0.22%.

Early in the week, traders are going to be most concerned about the update weather forecasts. Coming into the week, traders were basing their assessment of the market on reports from last week calling for cold temperatures across the northern U.S. for the first week of April. Some reports are even saying the cooling could last into the second week of April.

To recap last week, on March 29, the U.S. Energy Information Administration (EIA) reported that domestic supplies of natural gas fell by 63 billion cubic feet for the week-ended March 23. Traders were looking for a draw of about 70 billion. The five-year average draw is 46 billion.

Working gas in storage was 1,383 Bcf as of Friday, March 23, 2018, according to EIA estimates. This represents a net decrease of 63 Bcf from the previous week. Stocks were 672 Bcf less last year at this time and 346 Bcf below the five-year average of 1,729 Bcf. At 1,383 Bcf, total working gas is within the five-year historical range.

In other news, over the weekend, Forbes ran an opinion piece which stated the U.S. Energy Information Administration’s National Energy Modeling System projects that U.S. gas production will increasingly outpace demand.

Essentially, the current rally will last until the weak shorts are driven out of the market and a major stopper comes in to drive prices back down. The current rally may also be reflecting expectations of at least one more storage withdrawal than we typically see this time of year. After this event, we’re likely to see another move to the downside with production rising and weather moderating.

The short-term range is $2.831 to $2.610. Its 50% to 61.8% retracement zone at $2.720 to $2.747 is currently providing resistance.

The main range is $2.951 to $2.600. Its retracement zone is $2.775 to $2.817. This is another potential upside target.

We’re looking for a bearish tone to develop on a sustained move under $2.720.

A sustained move over $2.747 is likely to drive the market into $2.775 to $2.817 where the next wave of sellers are likely to show up.

Taking out $2.831 will signal that traders believe that cold temperatures will remain beyond the second week of April.