Natural Gas Price Fundamental Weekly Forecast – Mixed 15-Day Forecast Could Trigger Short-Covering Rally

Natural gas prices closed lower last week but well off their lows as fluctuations in the long-range weather data drove choppy, two-sided price action throughout the week,

Helping to manipulate prices last week were the offsetting American and European weather models, which seemed to offer two different outlooks for the coming 15-day pattern, which Bespoke Weather Services described as “messy”.

The week started with trends showing December could end up in the top 10 warmest on record and futures dropping to levels more reminiscent of summer. However, by the end of the week, some colder trends in this week’s forecast helped fuel a short-covering rally that could carry over into this week.

For the week, February natural gas futures settled at $2.603, up $0.017 or +0.66%.

Short-Term Weather Outlook

According to NatGasWeather for December 14 to December 20, “A weather system with rain and snow will track across the Southeast and Mid-Atlantic Coast Monday with highs of 40s and 50s. A stronger cold shot will follow across the Great Lakes and Northeast Tuesday – Thursday with highs of 20s to 40s, while cool with highs of 30s to 50s over the Rockies and Plains. These systems will combine to drive stronger demand this week. The West will see a mix of weather systems and mild breaks but overall mostly comfortable with highs of 40s to 60s. Much of the U.S. will warm back above normal next weekend. Overall, national demand will increase to moderate-high for the coming several days.”

Bespoke Weather Services said the coming 15-day pattern is a “messy” one that is likely to be warm, but with enough variability risks to prevent it from being solidly bearish.

The forecaster continues to lean toward the theory that warmer weather would continue to win out, but the setup late this month is “trickier,” as it needs to see if there is any attempt from tropical forcing to materially shift eastward toward the central Pacific. “…That would open the door to some colder risks.”

US Energy Information Administration Weekly Storage Report

The EIA reported on Thursday that working gas storage in the contiguous United States was 3,848 billion cubic feet in the week ending December 4, a net decrease of 91 billion cubic feet, or 2.3 percent, from the previous week.

The total working gas storage increased 8.7 percent from this time last year, or 7.2 percent above the five-year average, according to the EIA’s Weekly Natural Gas Storage Report.

Weekly Forecast

Production levels have dropped and exports are rising, helping to underpin prices, while the latest weather models are providing reasons to remain optimistic about firm to higher prices over the short-run. However, keep in mind these are not game changing events and that the longer-term outlook is still bearish.

Technically, the market formed a potentially bullish closing price reversal on the weekly chart. This usually signals a shift in momentum to up.

The main range is $3.452 to $2.393. If last week’s chart pattern is confirmed then look for the short-covering rally to possibly extend into its 50% to 61.8% retracement zone at $2.923 to $3.047. Since the main trend is down, sellers are likely to come in on a test of this area.

It’s going to take a major shift to colder in the 15-day forecast to take out this resistance area.

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