Natural Gas Price Fundamental Daily Forecast – Strengthens Over $5.652, Weakens Under $5.469 Ahead of EIA

Natural gas futures are trading higher shortly before the New York opening on Thursday after reversing earlier losses. Just as I suspected it would, the technical chart pattern played a major role in turning the market around ahead of today’s government storage report due to be released at 14:30 GMT.

Earlier in the week, I noted that the spike to the upside rally was created by a combination of short-covering and speculators chasing the market higher in reaction to the October futures expiration. Check that off the list.

I also noted that the move had little to do with the bullish fundamentals at this time. Check that also because traders said that prices are forecast to pull back ahead of an estimated large injection into storage and milder temperatures. And that another major rally is not likely to be the cards until the first cold spell hits.

Finally, I mentioned that professional traders seldom chase markets higher, they tend to buy the dips caused by speculator liquidation. Furthermore, this kind of rally especially at this time usually attracts profession short-sellers.

It looks like our analysis hit on all cylinders with the market pulling back into a short-term technical support area earlier today before reversing to the upside. However, we have more work to do because we have identified a potential counter-trend shorting area and a new more important area for value-seeking buyers.

At 10:58 GMT, December natural gas futures are trading $5.769, up $0.174 or +3.11%. This is up from an intraday low of $5.469.

Energy Information Administration Weekly Storage Report

Looking ahead to today’s U.S. Energy Information Administration (EIA) weekly storage report for the week-ending September 24, preliminary estimates show a build in the mid- to –upper 80s.

According to Natural Gas Intelligence (NGI), a Bloomberg survey found a median of 87 Bcf, with injection estimates ranging from 79 Bcf to 92 Bcf. The median forecast in a Reuters poll landed at a build of 88 Bcf, with a low estimate of 66 Bcf and a high or 92 Bcf.

The Wall Street Journal’s weekly survey produced an 84 Bcf average increase. Estimates ranged from 66 Bcf to 89 Bcf. NGI modeled a build of 89 Bcf.

The estimates compare with a build of 74 Bcf for the same week in 2020 and the five-year average of 72 Bcf.

Daily Forecast

The daily chart pattern is likely to play a major role in the direction of the December natural gas futures market on Thursday.

The short-term range is $4.879 to $6.425. Its 50% to 61.8% area at $5.652 to $5.469 is the nearest support. The lower level of this zone stopped the selling earlier in the session.

The minor range is $6.425 to $5.469. If today’s reversal creates enough momentum, we could see a move into $5.947 to $6.060. Trader reaction to this area will determine the next move.

Aggressive counter-trend sellers are likely to show up on the first test of $5.947 to $6.060. They are going to try to produce a secondary lower top which could lead to a change in trend to down.

Overtaking $6.060 will indicate the buying is getting stronger. This will make $5.469 an important support level with $6.425 the next upside target price.

If $5.469 fails as support then look for the selling to possibly extend into another value area at $5.185 to $4.892. Look for buyers on a test of this area. If $4.892 fails as support, we could see the start of a steep sell-off.