Natural Gas Price Fundamental Daily Forecast – Trader Reaction to $2.644 Will Set the Tone Today

Natural gas futures remained stuck in a range on Wednesday ahead of today’s U.S. storage report. Prices are nearly unchanged for the week after surging to a three-week high on Monday. Traders appear to be trying to figure out how to play the weather market so today’s report may have little impact on the price action.

According to the daily chart, what is likely to control the direction of the market is the short-term pivot at $2.644. Despite the downtrend and the somewhat bearish fundamentals, holding above this level could indicate the presence of speculative buyers. They have almost no chance of taking out any important highs, but they could trigger a rally strong enough to shake out a few of the weaker shorts.

On Wednesday, April Natural Gas futures settled at $2.667, down $0.016 or -0.60%.

Although updated weather forecasting models are showing a return to colder weather over the eastern U.S. during the first week of March, the bigger picture suggests that warmer temperatures will return right behind the cold weather, cutting into demand for the heating fuel.

Forecast

Prices are drifting lower early Thursday. At 0920 GMT, April Natural Gas is trading $2.656, down $0.011 or -0.41%.

Today’s U.S. Energy Information Administration’s weekly storage report is expected to show a draw of about 73 billion cubic feet (bcf) during the week-ended February 23.

That compares with a decline of 124 bcf in the preceding week, a build of 7 bcf a year earlier and a five-year average drop of 118 bcf.

Total natural gas in storage currently stands at 1.760 trillion cubic feet (tcf), according to the EIA.

That figure is 609 bcf, or around 25.7%, lower than levels at this time a year ago, and 412 bcf, or roughly 19.0%, below the five-year average for this time of year.

The short-term range is $2.565 to $2.723. Its 50% level or pivot is $2.644. We should continue to see an upside bias as long as the natural gas market holds above this level.

Taking out $2.723 will signal a resumption of the short-covering rally. If this move can generate enough upside momentum then we could see a drive into the main retracement zone at $2.774 to $2.823.

The downside bias is expected to return if $2.644 fails as support. If this move generates enough downside momentum then look for the selling to extend into $2.565 over the near-term.