Natural Gas Price Fundamental Daily Forecast – Weakens Under $1.878, Strengthens Over $1.928

Natural gas futures are trading lower on Friday after posting a dramatic technical closing price reversal top on Thursday. The price action indicates a shift in momentum to down after an impressive six-day short-covering rally. Prices fell sharply on Thursday despite a somewhat bullish government storage report after a change in the weather models shifted investor sentiment.

At 13:44 GMT, April natural gas futures are trading $1.887, down $0.044 or -2.28%.

Natural Gas Intelligence (NGI) reported that spot gas prices fell as the cold snap that had driven up demand in recent days was expected to move out of the United States beginning Friday.  NGI’s Spot Gas National Average tumbled 10.5 cents to $1.810.

Short-Term Weather Outlook

Natural Gas Intelligence said, citing a report from NatGasWeather, after some forecasts earlier in the week projected a late-February cold snap could extend well into March, the latest weather models fell short in sustaining the chilly outlook. The Global Forecast System (GFS) model lost 15-20 heating degree days (HDD) over the previous 36 hours, including 3-4 overnight and another 10 in the mid-Thursday run, according to NatGasWeather. However, the European model had been running colder comparatively and had given back little demand during the same period, the forecaster said.

Given the European model’s generally superior track record, traders were cautious to move the needle much on pricing, giving back only a couple cents on Wednesday once the warmer trends began showing up in the American dataset. However, the European model trended notably milder Thursday afternoon to better match the GFS, losing 11 HDDs versus Wednesday night’s run and 17 HDDs versus the previous 24 hours, according to NatGasWeather.

“What makes the pattern concerning is both the GFS and European models show cold retreating into Canada March 3-5 as milder temperatures regain ground after what is still a rather cold pattern Feb. 27-March 2, just not quite as impressively so in the latest data,” the forecaster said.

U.S. Energy Information Administration Weekly Storage Report

The EIA reported Thursday that domestic supplies of natural gas fell by 151 billion cubic feet for the week-ended February 14.

Ahead of the report, EBW said the major surveys indicate a withdrawal between 141 and 147 Bcf, a pull on the lighter side of that range could further weaken prices. Bloomberg analysts projected withdrawals as low as 138 Bcf and as high as 158 Bcf. The Wall Street Journal estimates a figure as low as 135 Bcf. Reuters is looking for a withdrawal as high as 166 Bcf. NGI’s model called for a 149 Bcf withdrawal.

Last year’s withdrawal was 163 Bcf and the five-year average draw is 136 Bcf, according to the EIA.

Total stocks now stand at 2.343 trillion cubic feet, up 613 billion cubic feet from a year ago, and 200 billion cubic feet above the five-year average, the government said.

Daily Forecast

The main range is $2.196 to $1.788. Its retracement zone at $1.992 to $2.040 stopped the rally on Thursday at $2.024.

The minor range is $1.831 to $2.024. Its 50% level or pivot is $1.928.

The short-term range is $1.788 to $2.024. Its retracement zone at $1.906 to $1.878 is currently being tested.

The direction of the April natural gas futures market on Friday is likely to be determined by trader reaction to the 50% level at $1.928 and the Fibonacci level at $1.878.

Look for an upside bias to develop on a sustained move over $1.928, and for a potential acceleration to the downside if $1.878 fails as support.