Natural Gas Price Fundamental Daily Forecast – Weather Model Volatility Remains Extremely High

Natural gas futures are trading flat early Wednesday as investors wait for further confirmation of yesterday’s dramatic reversal to the upside. Just one day after forecasts for warmer temperatures drove prices sharply lower, news that key demand areas could experience a few shots of cold temperatures well into November turned the futures contract higher on Tuesday.

At 0741 GMT, December Natural Gas futures are trading $3.294, up $0.011 or +0.34%.

Additionally, NaturalGasIntel.com said, “Spot gas prices were mostly higher as reinforcing cold fronts forecast for the Midwest and Northeast for the rest of the week continued to drive up prices there, while chilly, wet conditions led to smaller gains in that region. The NGI National Spot Gas Average climbed 10 cents to $3.335.”

Forecast

The price action over the past week suggests there is too much uncertainty over the weather to control the risk. Weather model volatility remains extremely high and until there is some consistency in the forecasts, we’re likely to continue to see volatile two-sided trading.

Looking ahead to Thursday’s Energy Information Administration (EIA) report, early estimates range from 50 Bcf to 72 Bcf. This week’s report will be very important to market sentiment to see how record production fared against colder-than-normal conditions across much of the U.S. last week.

In other news, “storage deficits appeared set to increase after Thursday’s Energy Information Administration weekly storage report, and therefore, the background state remains bullish”, according to NatGasWeather.

The weather firm expected storage deficits “to grow by more than 30 Bcf after the report, with further increases next week as cool conditions this week are accounted for, increasing deficits to more than 650 Bcf.”

“Deficits are likely to improve at least some on the milder first week of November pattern, but still not an exceptional amount,” NatGasWeather said.

“The weather data remains critical as the markets search out for when the back end of the 15-day forecast will again become colder than normal across the northern and eastern United States, ‘since it’s possible the milder pattern might only last around five days, although needing to prove it,’ the forecaster said.

The short-term range is $3.409 to $3.183. Its 50% level or pivot is $3.296. Based on the price action the past four sessions, the pivot is controlling the short-term direction of the market. Look for a bullish tone to develop on a sustained move over this level. Look for the downside bias to resume if this level provides resistance.

Tuesday’s price action suggests the best support is $3.185 to $3.183. This is followed by $3.161. The best value area is $3.125 to $3.057.