Natural Gas Price Fundamental Weekly Forecast – Next Move Hinges on March 8-11 Weather Forecast

Natural gas futures rallied last week on the back of weather forecasts that pointed toward increasing demand. Although the latest forecasts point toward milder temperatures this week, all eyes are on the impressively cold pattern expected to hit in the first week of March.

Buyers are reacting to colder trends forecast for March 6-9. Additionally, there are signs of the cold weather returning March 8-11.

For the week, April natural gas futures settled at $2.739, up $0.129 or +4.94%.

U.S. Energy Information Administration Weekly Storage Report

On Thursday, the U.S. Energy Information Administration announced a 177 Bcf withdrawal for the week-ended February 15. This was more than 164 Bcf forecast.

Stocks are now at 1,705, sitting 362 Bcf lower than the five-year average of 2,067 Bcf. Inventories at this time last year stood about 4% higher than current levels at 1,778 Bcf, according to the EIA.

Short-Term Weather Outlook

According to NatGasWeather for February 22 to March 1, “Conditions will warm across the Ohio Valley and Northeast through the weekend with highs into the 40s and 50s but also with rain and snow along a frontal boundary between cold central US air and warmer East air. The West will be cool to cold as weather systems track through. Mild high pressure will dominate the South & Mid-Atlantic Coast with highs of 60s to 80s. A quick cold shot across the Midwest to Northeast Monday will give a minor jump in demand before warming mid-next week. Strong cold shots will sweep across the northern and central US late next week. Overall, national demand will be moderate the next 7-days. “

Mid-Term Weather Outlook

NatGasWeather said on Friday, “The weather data remains a little too mild through next week, then quite cold with the pattern for most of the country February 28-March 7. But what could be most important is if cold is able to continue March 8-11 and where the data has been inconsistent in recent days.”

“One camp of data shows mild trying to build back across the East for what would be a not cold enough pattern. However, a second colder camp keeps cold over much of the country besides the Southwest is relatively bullish set up. The overnight data gave the colder camp a little better odds of being more correct but with more to prove. Today’s mid-day and afternoon data will be important to see which camp gains better odds before the weekend break.”

Weekly Forecast

Technical Analysis is basically in agreement with the weather forecasts.

Technically, the short-term target zone or potential resistance area is $2.749 to $2.792. Last week, the rally stopped just short of a 50% level at 2.749. Furthermore, it also closed in a position to overtake this level.

If the weather forecast for February 28-March 7 continues to call for colder temperatures then prices are likely to rise into the retracement zone at $2.749 to $2.792. Additionally, if the second forecast shows an extension of the cold into March 8-11, then look for a potential rally into $2.812 to $2.871.

The charts indicate the best resistance area is $2.792 to $2.812. Since the weekly trend is down, we’re looking for sellers to re-emerge on a test of this zone.

If the weather forecasts changed to weaker over the week-end then we may have seen the top of this rally last week on the move into $2.747. This could fuel renewed selling pressure this week.