Natural Gas Price Fundamental Daily Forecast – Weakens Under $2.146, Strengthens Over $2.186

Natural gas futures are trading lower early Thursday with recent lost demand and less intimidating cold air weighing on prices. Weaker spot prices were also helping to cap gains.

Prices rebounded from earlier losses to close higher on Tuesday, with some bullish speculators hoping was a sign of the start of a short squeeze. However, Thursday’s weaker price action may have put to bed those hopes.

At 09:08 GMT, February natural gas futures are trading $2.165, down $0.024 or -1.05%.

Short-Term Weather Outlook

According to NatGasWeather for December 31 to January 6, “A weather system with rain and snow showers will track into the East today with highs of 30s to 50s for stronger demand. The central and southern US will be mild the next few days with highs mostly in the 40s to 60s, but then warming late week with 50s to 70s gaining increasing for light demand. The West will see a mix of mild and cool areas with only local showers. Strong high pressure will build back over the East late in the week with temperatures again warming well above normal and into the 40s to 70s. Overall, moderate national demand Tuesday – Wednesday, then back to very light Thursday – Sunday, averaging out to low.”

U.S. Energy Information Administration Weekly Storage Report

Looking ahead to Friday’s EIA weekly storage report, traders are estimating a 65 billion cubic feet draw.

Last Friday, the EIA reported that domestic supplies of natural gas fell by 161 billion cubic feet for the week-ending December 20. Analysts were looking for a drop of 150 to 153 bcf.

Total stocks now stand at 3.250 trillion cubic feet, up 518 bcf from a year ago. The five-year average stands at 3.319 bcf, down 69 bcf, according to the government report.

Daily Forecast

Unless there is a dramatic shift in the bearish weather outlook, traders are likely to take their cues from the daily chart pattern on Thursday.

The main trend is down. A trade through $2.151 will signal a resumption of the downtrend. The main trend will change to up on a move through $2.351.

The market is currently trading inside a downtrending channel. The top of the channel comes in at $2.186 and the bottom of the channel is 2.146.

Look for the downside pressure to continue on a sustained move under $2.146. Overcoming and sustaining a move over $2.186 will signal the return of buyers. This could trigger the start of a short-covering rally with $2.251 the next likely upside target.