Natural Gas Price Fundamental Daily Forecast – Testing Key Value Area at $5.269 – $4.956

Natural gas futures are inching higher early Tuesday after touching its lowest level in two weeks the previous session. The market is also testing a key technical area that may be controlling the near-term direction of the market.

The catalysts behind the price action are forecasts calling for milder temperatures during early- to mid-November and light demand that appear to be offsetting reports of consistent demand for liquefied natural gas (LNG).

At 07:52 GMT, December natural gas is trading $5.277, up $0.091 or +1.75%.

Mild Near-Term Temperatures Minimizing Demand

Gains are being capped by reports calling for increasingly warm temperatures into mid-November that are limiting heating demand in several key areas in the United States. Weak longs are reducing exposure in the market as they face another year of a delayed start to winter.

Typically, bullish traders take risks at this time in an effort to play seasonal cold trends in the hopes of extreme cold temperatures later in the winter season. But this year’s start of meteorological winter is being highlighted by warmth and low demand.

Bespoke:  Weather Keeping Things Uncertain

“Warmer changes ruled the models over the weekend, with the changes coming after this week,” Bespoke Weather Services said. A “turn back warmer as we move into the middle third of November…generally looks to be on track. Given that we are into the time of year when weather becomes a dominant force in price action, this keeps things rather uncertain.”

NatGasWeather:  Leaning Toward Mild Conditions

NatGasWeather’s latest outlooks are tilting toward mild conditions. Its analysts said the European weather model lost “a hefty” 16 heating-degree days over the weekend “on warmer trends over the eastern half of the U.S. late this week into the following week.’

EBW Analytics Group:  Highlights ‘Strong Production’

EBW Analytics Group analysts highlighted “strong production indicators” last week that developed as the demand outlook weakened. Production had hovered close to 94 Bcf at points last week, near 2021 highs, Natural Gas Intelligence (NGI) reported.

EBW’s analysts also observed projected heating demand declines between Friday and November 18 associated with “bearish anomalies” strengthening over the Upper Midwest and through the Northeast.

“Although there are signs that renewed cold may return for the latter half of November, price declines are likely to follow the weekend demand loss early this week,” the EBW team said.

Short-Term Outlook

December natural gas is hovering near a major support zone at $5.269 to $4.956. This area held at $5.070 on October 19 and yesterday at $5.116. Although we haven’t seen a strong recovery rally yet, this area is very important to the near-term structure of the market.

Our work suggests an upside bias could develop on a sustained move over $5.269. However, a downside bias could develop on a sustained move under $4.956.

Taking out the September 21 main bottom at $4.879 will be a sign of weakness. This price has the potential to be the trigger point for a steep sell-off.