Natural Gas Price Fundamental Weekly Forecast – Pressured by Overproduction, Mild Winter Forecast

Natural gas futures fell sharply last week on concerns over low demand and increased production.

In hindsight, the price action last week suggests the market is being manipulated by thin trading conditions and rapid shifts in the weather patterns. However, despite the volatility on the daily chart, the weekly downtrend has remained intact.

December Natural Gas futures finished the week at $2.964, down $0.149 or -4.79%.

The price action the past two weeks represents a microcosm of the price action we’ve seen all year. It shows that speculative buyers have been willing to support the market on the first sign of bullish weather, but the major players have been unwilling to let up on the short side. They treated almost every rally this year as a new shorting opportunity. Their focus remained on the primary theme of the year, overproduction.

Forecast

Natural gas closed under a major retracement zone at $3.194 to $3.063 that had been holding the market up for most of the year. This zone is new resistance.

The market also closed on Friday in a freefall and near its low which indicates the selling pressure is likely to continue this week.

Although the injection season is expected to end on October 31, utilities are likely to continue to add gas into storage through the middle of November this year, boosting total stocks to about 3.9 trillion cubic feet, which is near the five-year average for the annual peak.

This number is bearish because traders believe it should be more than enough to meet demand this winter if the latest forecasts for another warm winter are correct.

According to the U.S. National Weather Service, temperatures in December, January and February are expected to be warmer than normal across much of the country again this year.

Once again, we can reduce this market down to the weather. As long as temperatures remain mild, prices are likely to drift sideways to lower. Periodic cold blasts should trigger a few short-covering rallies, but as long as the trend remains down on the weekly and monthly charts, the best thing to do is to sell rallies.