Natural Gas Price Fundamental Daily Forecast – Trader Challenge: Buy Strength or Play for Pull Back into Support Zone

Natural gas futures are trading lower on Wednesday shortly after the regular session opening which may be an indication that the cold weather pattern may be breaking up, encouraging profit-taking by some speculative buyers. The pause in the rally could also be indicating an end to the short-covering. If this is the case then the market may pull back into a value zone, which could attract the attention of fresh speculative buyers.

At 13:48 GMT, December natural gas futures are trading $2.849, down $0.140 or -0.51%.

Although forecasts for additional cold temperatures later in the month continued to drive prices higher on Tuesday, today’s weakness suggests traders may think the current rally has run its course due to renewed worries over ample supply.

Short-Term Weather Outlook

According to NatGasWeather for November 6 to November 12, “A strong cold shot will dive down the Plains and sweep across the Midwest the next few days with rain, snow, and chilly lows of 5 to 30s. This system will advance into the East Thursday through Friday with rain and snow to aid stronger national demand. The southern US will be mostly comfortable with highs of upper 60s to 80s, apart from brief cooling Thursday as a quick cool front with showers tracks through. The West will be mild to warm with strong high pressure and highs of 50s to 80s besides the cooler Northwest. After a brief break between cold shots late this weekend, an Arctic blast will arrive next week. Overall, high to very high national demand the next 7-days.”

Early Look at EIA Storage Report

Energy Aspects issued a preliminary estimate for a 40 Bcf build for the period ended November 1. “Heating loads will sharply rise week/week as the injection rate more than halves,” the firm said. “That slowdown also corresponds to a 0.4 Bcf/d week/week output decline.”

Analysts at Tudor, Pickering, Holt & Co (TPH) called for a 47 Bcf build for this week’s EIA report. An injection in this range is “not materially different from norms” around 56 Bcf, the TPH team said.

Daily Forecast

The early price action suggests a short-term top may be forming, but this is not likely to be a trend-changing event. If the selling pressure persists then look for a minimum correction into the short-term retracement zone at $2.740 to $2.701. Since the main trend is up, buyers could step in on a correction into this potential support zone.

On the upside, another breakout over $2.905 could create enough upside momentum to challenge the late May top at $3.009.