Natural Gas Price Fundamental Daily Forecast – Technical Factors Triggering Short-Term Rebound Rally

Milder temperatures, weak spot prices, strong production and a lot of short speculators are helping to generate the bearish tone in the market. If there is a rally it is likely to be driven by technical factors.
James Hyerczyk
Natural Gas

Natural gas futures are trading higher on Wednesday. Several factors could be driving the price action. We could be looking at a slight shift in the weather forecast toward cooler temperatures. Bottom-pickers could have stepped in ahead of the main bottom at $2.521. The lack of follow-through to the downside after two days of selling pressure could’ve spooked a few weak short-sellers enough to book profits and square positions ahead of Thursday government storage report.

At 13:02 GMT, January natural gas is trading $2.620, up $0.044 or +1.75%.

Milder temperatures, weak spot prices, strong production and a lot of short speculators are helping to generate the bearish tone in the market. However, as INTL FCStone Financial Inc. Senior Vice President Tom Saal said on Tuesday, “Technically, we’re still in the early stages of winter. The coldest weather is ahead of us based on seasonal averages. There’s still a lot of risk out there in either direction.

Short-Term Weather Outlook

According to NatGasWeather for November 20 to November 26, “One weather system will track across the Great Lakes into the Northeast the next few days, while a second system pushes into the West with rain and snow. However, these systems won’t bring much added demand since they are only slightly cool for this time of year with highs of upper 30s to 50s. The rest of the US will be mild to warm today with highs of 60s & 70s, warmest over Texas and the South as high pressure strengthens, then shifts across the East Thursday through Friday. The western system will push into Texas and the central US Thursday then across the East Friday through Saturday. Overall, light to moderate national demand through Thursday, then increasing slightly this weekend.”

Early Look at This Week’s EIA Report

The Desk’s Early View storage survey Friday showed 20 respondents predicting a median 89 Bcf withdrawal for the week ended November 15, with expectations ranging from a withdrawal of 65 Bcf up to a 102 Bcf pull.

Daily Forecast

The early price action suggests traders are just adjusting positions ahead of Thursday’s EIA report. Furthermore, we could be looking at some aggressive bottom-picking. However, there is nothing in the weather forecasts at this time to indicate a pattern shift. Overall, the fundamentals are still bearish. Therefore, if there is a rally it is likely to be driven by technical factors.

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