Natural Gas Price Fundamental Daily Forecast – Traders Waiting for Updated Weather Forecasts

Natural gas futures rallied on Monday, taking out last week’s high, but stopping at $3.000, just short of the January 30 main top at $3.010. Keep in mind that the move took place during a thinly traded holiday trading session.

July Natural Gas finished the shortened session at $2.987, up $0.024 or +0.80%.

Monday’s move had no real effect on the structure of the chart pattern. The main trend is up and we already knew that $3.010 was a main top

Early Tuesday, natural gas is under pressure. At 0642 GMT, the July futures contract is trading at $2.977, down $0.010 or -0.33%.

Last week’s forecast was spot on with higher-than-normal temperatures blanketing several key demand areas in the United States over the week-end. The forecast also called for hot weather to extend into this week. This is the news that drove the market higher last week so I think it’s safe to say, the news has already been priced into the market.

Forecast

Traders are already moving on to the next weather forecast that calls for the heat to continue this week, but then turn more seasonal next week. So we could be looking at increased demand this week and lower demand next week for a combined neutral reading.

The current price action suggests this phase of the developing rally has run its course and the market may be ripe for a near-term correction.

The chart pattern shows sellers are defending $3.000, just below the January 30 main top at $3.010.

The near-term range is $2.804 to $3.000. If we are topping then we’re likely to see a pullback to its retracement zone at $2.902 to $2.879. This is a value area. Since the main trend is up, buyers are likely to show up on a test of this zone.

Essentially, the intermediate-term outlook for the market is bullish because of concerns over the current supply deficit carrying over into the summer cooling season. Short-term, however, the market may be ripe for a correction due to technically overbought conditions and a slight change in the weather forecast.

Of course, prices could spike higher at any time if the weather services put heat back into the forecast. The next target over $3.010 is $3.043.

Traders are looking for an updated forecast which could come out today or Wednesday. This forecast should set the tone for the week or at least until Thursday’s weekly U.S. Energy Information Administration report.