Natural Gas Price Fundamental Daily Forecast – Was Upside Gap “One and Done” or Start of Longer-Term Move?

Natural gas prices gapped higher on the early session opening on Monday, but the price action following the move suggests sellers are still in control. The early price action was likely fueled by colder than expected week-end temperatures and consequently higher-than-expected week-end demand. Traders are now waiting to see the forecast for the next 10 to 14 days. This is likely to set the tone for the rest of the session.

At 1105 GMT, March natural gas is trading $3.084, up $0.139 or +4.72%.

Storage Recap

The EIA reported on January 10 a 91 Bcf withdrawal from U.S. gas stocks for the week-ended January 4. This number came in on the strong side of the estimate needle, but failed to generate any major buying interest. Trader consensus showed an expected 84 Bcf withdrawal. The five-year average decline stands at 187 billion.

The data, also showed a revision that resulted in decreased working gas stocks of about 4 billion cubic feet in the Mountain region last week. That brought the actual weekly withdrawal down to 87 Bcf.

Total stocks now stand at 2.614 trillion cubic feet, down 204 billion cubic feet from a year ago, and 464 billion below the five-year average, the government said.

NatGasWeather Week-end Warning

NatGasWeather ended last week by saying, “The risk going into the week-end break is how much frigid polar air over Canada January 19-26 will push across the border into the US. The overnight GFS model is again quite a bit colder/more aggressive than the European model, which shows colder air arriving January 19-21 and January 24-25, but with a decent break January 22-23. It would go a long ways for the bullish case if the European model saw the pattern as cold as the GFS.”

Forecast

We’re in a short-term weather market, but this one is a little more complicated than most.

If the market gapped higher because of an unexpected jump in week-end demand, then the rally could be a “one and done” situation.

If the market gapped because of a change in the 10-14 day forecasts then we could see further upside action. The next move will be determined by how far the cold from Canada pushes across the U.S. border and how long it will last. A push deep into the U.S. will be bullish, however, a slight push will be neutral to only slightly bullish.

Therefore, we have to conclude that updated weather forecasts are likely to fuel the price action the rest of the session.

The daily chart indicates the key support today is $3.048. The market could lose its current upside momentum if this price fails. This could drive prices back to at least $2.976.

Taking out $3.143 later today could create the upside momentum needed to challenge the main 50% level at $3.215.