Natural Gas Price Fundamental Weekly Forecast – Bearish Weather Models Weighing on Prices

Natural gas futures finished lower last week as the last of the bullish traders finally decided that the winter season was over. Early in the week, natural gas traders tried to hold prices in a range in anticipation of the start of injection season, but a change in U.S. and European weather models to warmer/bearish for the first half of April encouraged longs to dump positions early and for shorts to announce their presence with authority.

According to NatGasWeather, “…Simply put, after a rather strong late season cold blast late this weekend through early next week, a rather bearish pattern is expected to dominate the country April 5-12 with very light national demand.”

The weather experts went on to say, “The latest data overnight advertises temperatures in the 70s and 80s across much of the country April 8-12, according to the forecaster, and this period should be a good test to see how large builds can be this shoulder season when favorable weather conditions and near record production work in concert.”

For the week, May Natural Gas settled at $2.662, down $0.105 or -3.79%.

Weekly Storage Report

Last week, the U.S. Energy Information Administration reported that domestic supplies of natural gas fell by 36 billion cubic feet (Bcf) for the week-ended March 22. Traders were looking for a draw of about 33 Bcf. Total stocks are now at 1.107 trillion cubic feet (TCF), down 285 Bcf from a year ago and 551 below the five-year average, the government report showed.

Short-Term Weather Forecast

According to NatGasWeather for March 29 to April 4, “Mild conditions will rule the Ohio Valley and East the next few days with highs warming into the 40s to 80s. It will be very warm across the southern US and Mid-Atlantic Coast with highs of 70s and 80s for light demand. The West and central US will see areas of rain and snow today, then becoming colder this weekend as a strong cold shot sweeps through with lows of teens to 30s. This cold front will then push across the Great Lakes and East early next week for strong national demand. However, warm conditions with highs of 60s to 80s will gain across the country late next week. Overall, national demand will swing between moderate and high into next week.”

Weekly Forecast

Last week’s downside momentum is expected to continue this week as nothing in the short-term weather forecasts suggest a surprise turnaround. The primary downside target is the February 7 main bottom at $2.592.

If there is a rally then it’s likely to be fueled by short-covering and position-squaring that could set up the next shorting opportunity. The best shorting opportunity will come on a retest of the retracement zone at $2.756 to $2.797.