Natural Gas Price Fundamental Daily Forecast – Will Investors Buy Strength, or Play for Pullback into Support?

Natural gas futures are trading higher Wednesday, shortly before the regular session opening. Buyers are trying to mount a comeback following early session weakness. The weather is likely to continue to be the main driver of price action over the near-term. Yesterday’s technical closing price reversal top and today’s early follow-through to the downside suggests that traders may have fully priced-in the expected increase in demand for the next two weeks.

At 12:22 GMT, March Natural Gas is trading $3.264, up $0.015 or +0.35%.

Traders are saying that an easing of cold expectations may have also been the catalyst behind the selling pressure. Bespoke Weather Services blamed Tuesday’s selling pressure on an overnight moderation in the European weather model that revised gas-weighted degree day (GWDD) expectations lower over the next 14-days. They also said that the market may have overestimated the cold risks from the American model, putting it in an overbought position.

Although we may be ripe for a short-term price adjustment due to changes in the 10-14 day forecast, buyers may step in again on any meaningful dip because colder temperatures are expected to return in early February.

“We see the tropical forcing signal for the week working against major sustained cold and instead allowing for more transient cold across the southern tier,” Bespoke said. “Late Week 2 and especially into Week 3 that should change, however, as we see a very significant cold signal dominating for the first half of February.”

“We are beginning the transition into the much colder February pattern we had been expecting, and though the transition can be a bit noisy at times, we would expect the long-range bullish pattern look on model guidance to hold and grow over the coming week.”

Forecast

Given the new weather forecasts, the uptrend is not over, but we may see a short-term correction before moving higher. The price action will be determined by whether investors prefer to buy strength, or wait for a pullback into support.

The main range is $3.659 to $2.771. The market is currently testing its 50% to 61.8% retracement zone at $3.215 to $3.320.

The market will strengthen on a move over $3.320, which will put it in a position to eventually breakout over this week’s high at $3.373.

Natural gas will weaken under $3.215, but this could trigger a move into the short-term support zone at $3.091 to $3.024. If the weather pattern into February continues then buyers are likely to re-emerge on a test of this area.