Natural Gas Price Fundamental Daily Forecast – Weak Shorts Being Taken Out by Speculative Buyers

Natural gas gapped higher early Tuesday, reaching its highest level since December 4. The price action was driven by lingering cold temperatures that stretched from the Midwest to New England and from the North to the far South.

At 0838 GMT, February natural gas futures were trading $3.012, up 0.059 or +2.00%. The market opened the session after an extended week-end at $3.030. The upside momentum created by the gap opening drove prices into $3.097 before sellers came in to stop the move.

According to the latest weather forecasts, the brutal cold is expected to stick around all week. Hard freeze warnings will remain in effect through Wednesday from Texas to northern Florida, according to the National Weather Service.

Temperatures will get even colder at the end of the week and into the weekend in the Great Lakes region and parts of the northeast.

And the Southeast will remain 10 to 15 degrees below average temperatures through the weekend, according to CNN meteorologist Taylor Ward.  “The cold is here to stay and the worst is yet to come,” Ward said.

The National Weather Service tweeted Monday night that parts of the U.S. this week will see a “prolonged period” of below-normal temperatures. According to the NWS, (An) “Arctic air mass will bring a prolonged period of much below normal temperatures and dangerously cold wind chills to the central and eastern U.S. over the next week.”

The cold weather is driving out the weaker short-sellers. All the six-day rally has accomplished is overcome a series of retracement levels at $2.886, $2.941, $2.962 and $3.030. It hasn’t taken out any significant tops like $3.210 and $3.320.

If a short-term range forms between $2.562 and $3.097 then we could even see a pullback into its retracement zone at 2.830 to $2.766.

All we can count on at this time is volatility because we’re not sure how long the cold temperatures will last. Traders are currently pricing in their expectations for demand.