Natural Gas Price Fundamental Daily Forecast – Traders Waiting to See Which Way Canadian Cold Moves

Natural gas futures are trading lower but near the high of the session as prices continue to hover just above last week’s multi-month low. The sideways price action so far this week suggests investors are assessing the impact of near-term warmth and the potential for colder weather during the first week of January on demand.

At 14:19 GMT, March natural gas futures are trading $3.615, down $0.027 or -0.74%.

Short-Term Weather Outlook

According to NatGasWeather for December 21-27, “National demand was moderate Monday as chilly lows of 0s to 30s lingered over the Midwest and Northeast due to recent weather systems. Demand would’ve been stronger if not for mild to nice conditions over most of the rest of the U.S. with highs of 50s to 70s.

National demand will again become light Wednesday-Sunday as high pressure strengthens over most of the central, southern, and eastern U.S. with highs of 50s to 70s.

Colder exceptions will be across the colder Northwest and Northern Plains as chilly weather systems bring rain, snow, and lows of -10s to 30s.

Overall, national demand will be moderate Monday into Tuesday, then low.”

Mid-Term Weather Forecast

Both the American and European weather models trended warmer overnight by showing milder conditions over northern portions of the country for this weekend through next week, according to NatGasWeather.

However, the models “both continue to forecast a rather chilly U.S. pattern January 1-5,” the firm said.

This is especially the case for the European dataset, which came in colder than its American counterpart for this time frame in the latest round of data, according to the firm.

“We continue to need to closely monitor the U.S. pattern for the first week of January since the slightest light shift northward with the frigid Canadian cold pool and forecast demand for the U.S. would drop off quickly,” NatGasWeather said. “Conversely, a slight shift south” for this intense cold during this period would see U.S. demand “rapidly increase.”

Early Look at Energy Information Administration Weekly Storage Report

Looking ahead to this week’s EIA storage report, Natural Gas Intelligence’s (NGI) learning machine is forecasting a much lighter-than-average 53 Bcf withdrawal for the week-ended December 17.

Last year, the EIA recorded a 147 Bcf withdrawal for the similar week, while the five-year average is a pull of 153 Bcf.

Daily Forecast

Prices have been consolidating for three days, but we’re still not certain if this will lead to a breakout to the upside or a breakdown to the downside.

In order for it to lead to an upside breakout, the cold weather currently in Canada, has to move into the United States.

If the cold front stays in Canada or move northward, then prices could plunge.

Having been burned several times on systems that didn’t pan out for the bulls, traders are being cautious when may lead to another day or two of rangebound trading.