Natural Gas Price Fundamental Daily Forecast – This Weekend’s Mild Cold Shot Could Fuel Short-lived Rally

Natural gas futures jumped on Monday, helped by the surge in crude oil futures, but mainly supported by cooler than forecast temperatures over the Easter holiday week-end and stronger-than-expected spot prices due to maintenance events throughout the country. Although the market backed off its intraday high late in the session, prices are attempting to rebound early Tuesday.

At 07:54 GMT, June natural gas futures are trading $2.566, up 0.008 or +0.31%.

There were different opinions as to what fueled Monday’s strength. NatGasWeather said the gains came as weather data over the week-end trended “slightly cooler” for this upcoming weekend and early next week, showing “weak cool shots” across the Great Lakes and Northeast.

“It’s certainly not going to be cold, just a little cooler than the data showed last week,” said NatGasWeather. It also attributed the late session weakness to a forecast that “did back off slightly on the amount of cold air pushing across the Canadian border next week.”

Bespoke Weather Services didn’t see the weather as the cause of the rally, but rather, it attributed the gains in part to stronger than expected cash prices.

They went on to say that “Forecast demand levels remain well below normal as we close April and head into early May, although we did gain some demand in weather modeling over the long week-end.” They further added that “we feel we are closer to a more typical ‘spring rally’. However, “Longer-term, summer demand is expected to lag last year, which could create headwinds for any rally down the road.”

Daily Forecast

The daily chart shows that traders may be trying to establish support in the $2.525 to $2.500 area. If this move is able to create strong upside momentum then we could see a short-term run into the nearest resistance area at $2.647 to $2.675.

However, with traders expecting to see a string of triple-digit injections over the next seven weeks, gains are likely to be limited as hedgers and bearish speculators are likely to step up their shorting.

EBW Analytics Group CEO Andy Weissman put it this way. “Warmer-than-normal weather during the second half of April and expectations for continued below-normal demand during the first few weeks of May have finally broken this string (of above-normal weather-driven demand), leading to a record early April injection last week and breaking support for the front-month contract just above $2.50 for the first time in nearly three years.”

“Any gains driven by the colder weekend weather trends could prove “short-lived” as the market shifts its focus to a potential run of “seven straight 100 Bcf-plus injections starting next week,” Weissman added.