Natural Gas Price Fundamental Daily Forecast – Uncertainty Over Short-Term Weather Outlook May Be Limiting Gains

Natural gas futures finished a volatile trading by posting a potentially bullish closing price reversal bottom on Wednesday. The chart pattern suggests the buying may be greater than the selling at current price levels although some will say the move was partly fueled by a generally bullish tone in the financial markets.

March natural gas futures settled on Wednesday at $3.283, up $0.022 or +0.67%.

Traders said the strength in the market came as a surprise because of weakness in the spot market due to the unseasonably mild weather forecast for the next several days. Traders agreed that the rebound in prices was likely due to the expiration of the January futures contract on Wednesday rather than any approaching cold systems.

Forecast

March natural gas futures are posting a mild recovery on Thursday but still trading inside yesterday’s range. Prices could surge today if buyers can take out a short-term technical pivot at $3.384. However, gains could be limited by another potential resistance level at $3.546. The trend will change to up on a move through the last main top at $3.659.

A trade through $3.109 will negate yesterday’s reversal bottom and signal a resumption of the downtrend. This could trigger an acceleration into the November 2 bottom at $2.890.

The technicals and the fundamentals indicate the market is likely to continue to trade sideways to lower over the near-term. However, short-covering could begin to increase over $3.384.

Short-Term Weather Outlook

There is still a lot of uncertainty over next week’s weather forecasts. Traders could start pricing in cold snaps that are forecast for January 1-3 and January 6-9. However, there are still milder patches predicted for December 31-January 1 and January 4-5. These forecasts don’t seem to be impressive enough to sustain a long-term rally.

In other news, some weather firms are showing increased cold risks increasing through the month of January and peaking in February. This could mean significant cold by the month of February with some cold lingering into March.

U.S. Energy Information Administration Report

This week’s EIA report estimates are clustered around a withdrawal in the 47 Bcf to 60 Bcf range. This report is due out on Friday. The five-year average draw is 121 Bcf.