Natural Gas Price Fundamental Daily Forecast – Trader Reaction to $1.910 Will Determine Direction

Natural gas futures are trading lower on Wednesday while consolidating inside its six-session range of 1.862 to 1.957. Helping to put a lid on prices are short-range forecasts calling for generally mild temperatures for this time of year. Providing a little support is talk over tighter balances. February futures contract expiration is also fueling the sideways trade.

At 13:19 GMT, March natural gas is trading $1.888, down $0.020 or -1.05%.

Bespoke Weather Services told Natural Gas Intelligence that front-month prices appeared to find support Tuesday from “firm cash once again” and from a “continuation of tight balances.”

“It was also expiration day for options in the February contract, which often adds in some erratic price action as well,” Bespoke said. “It appears the market tried to target to settle on the $1.95 strike,” but weather models Tuesday “all went warmer, which finally took a toll and allowed prices to slide a couple of cents lower into the close.

“…The tighter balances should generally hold with these low prices, but if we continue seeing the weather forecast progress warmer over time, as we have the last two months, the balance alone will not be enough to allow the market to put in a bottom,” the forecaster said. “This appears to be the risk as we move forward, as we have still yet to see a meaningful change in the high latitude pattern to allow colder air to move into key areas of the U.S. As such, we could easily see a new prompt-month low once March takes over as the prompt month.”

Short-Term Weather Outlook

According to NatGasWeather for January 29 to February 4, “Several weather systems will impact the US this week, although none cold enough to impress. One mild system will track across the Southeast the next few days, while cooler ones impact portions of the West. Additional mild to cool systems will track across the country this weekend and early next week. Overall, highs will be in the 30s to 50s across the northern US, locally 20s, with 50s to 70s across the southern US. With frigid air remaining in Canada the next 7-days, national demand will be lighter than normal.”

Daily Forecast

We going to continue to the price action between $1.862 and $1.957. Most importantly is its 50% level at $1.910. Trader reaction to this level will determine the direction of the March natural gas futures contract today.

A trade through $1.862 will signal a resumption of the downtrend. A move through $1.957 will change the minor trend to up and shift momentum to the upside.

If there is a breakout to the upside, $2.033 to $2.076 becomes the primary upside target.