Natural Gas Price Fundamental Daily Forecast – Traders Pricing in Warmer Longer-Term Outlook

Natural gas futures are under pressure early Tuesday, continuing yesterday’s sell-off that was fueled by a change in the long-term weather forecast. While the short-to-medium term forecasts are calling for cold temperatures, the new longer-term forecasts are calling for milder temperatures than previously expected.

At 0829 GMT, December Natural Gas futures are trading $3.197, down $0.017 or 0.53%.

The forecasts for colder temperatures over the next two weeks seem to have been priced into the market. It appears that the reports three weeks out are causing issues for traders.

Once again, traders are calling for consistency, but rather than wait around for the news, some have decided to start banking profits after the recent run-up. Furthermore, rising production is also encouraging current long traders to square positions.

In other news, Bloomberg is reporting that natural gas prices in Western Canada continued their freefall amid restrictions on the area’s main pipeline network and as Enbridge Inc. targeted a mid-November restart for a ruptured pipe that cut off supplies to businesses, homes and oil refineries.

Gas at Alberta’s pricing hub dropped to a five-month low on Friday, according to data compiled by Bloomberg.

Forecast

The daily chart indicates the selling pressure is increasing. On Monday, the trend changed to down on the daily chart when sellers took out the recent bottom at $3.202. The next target is the main bottom at $3.161. This is the price the market was trading prior to the Hurricane Michael run-up which took prices to $3.409 on October 10.

Our chart work indicates that the market is likely to trade down to $3.125 to $3.057. This area represents value on the weekly chart so we’re likely to see buyers show up on a test of this zone.

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.