Natural Gas Price Fundamental Daily Forecast – Trader Reaction to $2.687 Will Set the Tone

Natural gas futures posted a two-sided trade on Tuesday before closing higher. The market traded inside Monday’s wide range which suggests investor indecision and impending volatility.

May Natural Gas futures settled at $2.697, up $0.014 or +0.52%.

The price action also suggests that traders may be searching for reasons that could support a rally. One factor that could still be bringing in the buyers is the lingering cold weather in several key demand areas. Speculation that we may see one or two more storage drawdowns may be underpinning the market.

However, buyers may be scarce for this time of the year because the arrival of spring-like temperatures is likely to keep a lid on demand and minimize storage erosion.

Furthermore, traders may also be looking beyond the current short-term forecast and lingering cold to longer-term forecasts calling for warmer-than-normal weather over a large part of the U.S. for the April-June period.

Forecast

Although there was a slight follow-through to the upside earlier in the session, natural gas prices are now trading flat. At 0834 GMT, May Natural Gas futures are trading $2.697, unchanged.

The mix of fundamental data this early in the week is providing little incentive for the buyers or sellers so we may continue to see a two-sided trade until Thursday’s U.S. Energy Information Administration’s weekly storage report.

Traders are also trying to assess end-of-season inventories which show a supply about 17% below the five-year average and at the second lowest level since 2010. This doesn’t seem to be too much of a concern for traders at this time since they fell that low demand and rising production should restore inventories to a healthy level before the summer demand season begins.

The chart pattern shows that the trend is down with resistance at $2.720, $2.747 and $2.764.

The short-term range is $2.610 to $2.764. Its 50% level or pivot is $2.687. Based on the price action earlier in the week, it looks like this price will determine the short-term direction of the natural gas market.

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