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James Hyerczyk
Natural Gas

Natural gas futures are trading higher on Tuesday after a “gap and go” sell-off the previous session. Today’s price action suggests there may have been another slight change to the demand outlook due to shift in the weather forecast toward colder, or the market may have found support inside a technical retracement zone following a successful test of this area on Monday.

At 13:36 GMT, December natural gas futures are trading $2.670, up $0.033 or +1.25%.

Monday Recap

Prices plunged on Monday as fresh week-end forecasts failed to predict enough lingering cold needed to offset the bump in supply. In the spot market, East Coast hubs rallied on potentially record-setting cold moving in this week, while the conclusion of pipeline maintenance in Oklahoma boosted prices at production-area hubs in the Midcontinent and West Texas, according to Natural Gas Intelligence.

Guidance Monday advertised a “material warmer shift in the pattern” that would bring a “step change” from frigid near-term temperatures to more seasonal conditions after this week, according to Bespoke Weather Services.

Given signs of continued production growth, “the market has made it clear that strong cold needs to stick around to support prices at levels we saw last week,” Bespoke said. “The ends of the model runs point to some uncertainty” for temperatures later this month, with the pattern in the Pacific looking “less favorable for cold” but with blocking developing on the Atlantic side that could “blunt some of the warmer influence from the Pacific side.”


Short-Term Weather Outlook

According to NatGasWeather for November 12 to November 18, “A frigid Arctic blast continues across much of the U.S. east of the Rockies this morning with lows of -0s to 20s. The cold front will bring rain and snow into the East today, with lows for major Northeast cities dropping into the 10s and 20s the next few nights to aid very strong national demand. A reinforcing cold shot is expected across the Northeast Friday through Sunday.”

“The West will be mostly mild and dry with highs of 50s to 80s, coolest Northwest. Much of the northern, central, southern, and eastern U.S. will warm early next week to near or warmer than normal. Overall, very high demand into the coming weekend.”

Daily Forecast

We’ll find out later today when the midday forecasts come out if today’s early strength is being driven by a shift in the weather pattern toward colder temperatures. However, we do know that the market is bouncing off a technical support area.

The main range is $2.388 to $2.905. Its retracement area and potential support zone comes in at $2.647 to $2.585. On Monday, the market found support inside this zone at $2.618. If this move is able to generate enough upside momentum, buyers could try to fill yesterday’s gap at $2.716 to $2.753.

Watch the price action and read the order flow on a test of $2.647 to $2.585. This should tell us if the bears are still in control, or if the bulls are retaking control. Furthermore, a trade through $2.575 will change the main trend to down.

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