Natural Gas Price Fundamental Weekly Forecast – Keep an Eye on the 8 to 14 Day Forecast

The threat of another blast of bitterly cold arctic air helped send natural gas futures sharply higher last week and the natural gas cash market to its highest level in more than a year. This week’s government storage report also came out better than expected.

March Natural Gas futures settled at $3.175, up 0.076 or +2.45%.

The U.S. Energy Information Administration reported that domestic supplies of natural gas fell by 288 billion cubic feet during the week-ended January 19. Traders were looking for a draw of about 272 Bcf. The five-year average withdrawal is 164 bcf.

Total stocks now stand at 2.296 trillion cubic feet, down 519 billion cubic feet from a year ago, and 486 billion below the five-year average.

Forecast

The main trend is up according to the daily chart. The main trend also turned up last week on the weekly chart when the March futures contract crossed the main top at $3.164.

The main range on the weekly chart is $3.391 to $2.532. Friday’s close was on the bullish side of its retracement zone at $3.063 to $2.962. This zone is now support.

If the upside momentum continues on the daily chart then buyers may make a run at the November 10 top at $3.272. Taking out this top may drive the market into the October 23 main top at $3.279. This price is also the trigger point for an acceleration to the upside with the next target the daily/weekly top at $3.391.

On the downside, the support zone on the daily chart is $2.945 to $2.886.

Fundamentally, investors are watching the development of a possible “polar vortex” that is expected to bring extremely cold temperatures to several key high demand areas in the U.S.

Weather.com is saying “A temperature roller coaster is ahead next week for areas east of the Rockies. Then, a pattern change will allow arctic air to surge into parts of the central and eastern U.S. to start February.”

“The first round of chilly conditions will slide into the northern Plains and Upper-Mississippi Valley on Thursday. Temperatures will be up to 20 degrees colder than average here. High temperatures will only reach the single digits and teens, while lows will plummet below zero for much of the region.”

“The below-average temperatures will then spread into the Midwest on Friday and to the East Coast by Saturday. High temperatures will not reach the freezing mark and lows will drop into the single digits and teens. Highs in the Ohio Valley and mid-Atlantic will generally be in the 30s, with lows in the teens and 20s.”

“The good news is that this next round will not be as cold as we saw earlier in January and at the end of December. The colder conditions are also not expected to reach as far south as the last arctic blast.”

Additionally, the next cold blast could come the first full week of February, but its temperature range is not clear at this time.

Last week’s price action probably means the first cold blast has been priced into the market. Therefore, any buying next week is likely to be of the speculative variety. Hedgers will likely be very active next week because these are attractive prices for new short positions. They could put a lid on the rally.

I don’t expect to see another wave of aggressive buying unless the first cold blast reaches temperatures that weren’t in the first forecast and if the second cold blast is colder or wider than previous forecast.

Once again, I think the first forecast has been priced into the market. Therefore, the second, or 8 to 14 day forecast is likely to be the main price driver this week.