Natural Gas Price Fundamental Weekly Forecast – May Be Setting Up for Long-Awaited Short-Covering Rally

Natural gas futures are edging higher on Monday shortly before the regular session opening. The market is also trading inside Friday’s range, which suggests investor indecision and impending volatility. It could also mean the market is transitioning from down to up especially after Friday’s potentially bullish closing price reversal bottom, following a bearish government storage report.

At 08:55 GMT, February natural gas is trading $2.144, up $0.014 or +0.66%.

US Energy Information Administration Weekly Storage Report

The EIA said on Friday that domestic supplies of natural gas fell by 58 billion cubic feet for the week-ended December 27, slightly less than industry expert estimates. Traders were looking for a draw of about 65 million Bcf.

The total figure is 18% higher than natural-gas levels at this time a year ago, but 1.2% lower than the five-year average.

Short-Term Weather Outlook

According to NatGasWeather for January 6 to January 12, “Mild conditions with highs of 40s and 50s will return across the South Great Lakes to Northeast Thursday through Friday. The West will be cool to cold with areas of heavy rain and snow. The southern US will be warm with highs of 60s to 80s, although cooling Sunday through Tuesday.

This weekend through Wednesday will be quite chilly as cold air sweeps across much of the country with lows of -10s to 20s North and 20s to 40s over the South. Late next week, mild high pressure will build across the southern and eastern US with highs of 50s to 80s returning, warmest over the South. Overall, very light demand Monday through Tuesday, moderate Wednesday, then back to low-very low Thursday through Sunday.

Daily Forecast

We could be looking at early signs of the short-covering rally that many have been expecting for weeks due to the massive amount of short positions in the market.

The chart pattern may be giving us an early indication that the buying is greater than the selling at current price levels, given Friday’s closing price reversal bottom.

The main trend is down according to the daily swing chart. A trade through $2.083 will negate the closing price reversal bottom and signal a resumption of the downtrend.

A move through Friday’s high at $2.163, however, will confirm the closing price reversal bottom. This could trigger the start of a 2 to 3 day counter-trend rally.

The main trend will change to up on a move through $2.351.

Based on the early price action and the current price at $2.144, the direction of the market on Monday is likely to be determined by trader reaction to a pair of downtrending Gann angles at $2.146 and $2.106.

Taking out $2.146 will indicate the presence of buyers. If this move creates enough upside momentum then look for a possible rally into a short-term retracement zone at $2.217 to $2.249.

A sustained move under $2.106 will signal the presence of sellers. This could trigger a break into $2.083 and possibly lower if the momentum is strong enough.