Natural Gas Price Fundamental Daily Forecast – Traders Looking for Consistency in Weather Forecasts

Natural gas futures are trading lower shortly before the regular session opening on Monday, which likely means the week-end weather was warmer than expected, or there have been changes in this week’s forecast calling for more average temperatures over the near-term. It is also possible that production numbers are starting to come in higher than expected.

At 0945 GMT, December Natural Gas futures are trading $3.278, down $0.031 or -0.94%.

To recap last week’s U.S. Energy Information Administration report, on Thursday, the EIA announced an injection of 81 Bcf into storage for the week-ended October 12. This figure put the current national stocks at 3.307 Tcf. Inventories now stand 601 Bcf lower than year-ago levels and 605 Bcf lower than the five-year average of 3.642 Tcf.

Thursday’s number fell largely in line with the 83 Bcf build forecast by a consensus of analysts. The five-year average build for the same time period is 79 Bcf.

Forecast

Traders will be especially sensitive to changes in the near-term forecast based on the price action late last week. Bearish traders responded to a change in the weather report on Thursday by selling. The new report raised temperature expectations. Prices rose sharply on Friday when the forecast shifted back to colder than average temperatures. Early Monday, prices are lower so the forecast driving the price action may be indicating warmer-than-expected temperatures.

We could see some volatility early this week as traders look for more consistency in the forecast and whether the cold will linger through the end of October/early November.

According to NatGasWeather.com, for October 22 to October 28, “Cool conditions will cover much of the Midwest to Northeast this week with lows dropping into the 20s to lower 40s as reinforcing cool shots sweep through. The West and Southeast will be warm with highs of 60s to 80s, while the Southwest and Texas will see increasing heavy rains as tropical moisture arrives in the coming days. Cool conditions will continue over the Midwest and East next weekend with strong demand. Overall, national demand will be high.”

Looking ahead to Thursday’s Energy Information Administration (EIA) report, early estimates range from 50 Bcf to 72 Bcf. This week’s report will be very important to market sentiment to see how record production fared against colder-than-normal conditions across much of the U.S. last week.

The daily chart indicates momentum may be shifting to the downside with the formation of a lower top at $3.384. A trade through $3.202 will change the main trend to down.

The first support zone is $3.228 to $3.185. The second support or major support zone is $3.125 to $3.057.

On the upside, the pivot is $3.306. Taking out this level will reaffirm the upside bias.