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Natural Gas Price Fundamental Weekly Forecast – Rally to Continue if Cold Extends Beyond March 16

By:
James Hyerczyk
Published: Mar 10, 2019, 12:31 UTC

Natural gas closed slightly higher last week as stubborn bulls continued to defend the downside while waiting for additional weather forecasts to support

Natural Gas

Natural gas closed slightly higher last week as stubborn bulls continued to defend the downside while waiting for additional weather forecasts to support their strong upside bias. Late in the week, the market was supported by forecasts that continued to show colder-than-normal temperatures reaching deep into March and depleting stockpiles.

Last week, May natural gas futures settled at $2.870, up $0.007 or +0.24%.

Short-Term Weather Outlook

NatGasWeather predicts for March 8-14, “Frigid cold will moderate across the central, northern and eastern US through the weekend with highs warming to near or warmer than normal. The southern US will be warm the next several days with highs spring-like and in the 70s and 80s. The West remains cool and unsettled as weather systems bring rain and snow. A fresh cold shot will sweep across the northeastern US early next week followed by a rapid warming mid-week where the Great Lakes and Northeast will be mild with highs of 40s to 60s, 70s and 80s over the Southeast. Overall, national demand will swing between high and moderate over the next week with more seasonal demand”

Bespoke Weather Services said, “The overnight weather data affirmed colder trends in the 11-15 day outlook period.” The forecaster pointed to “a strengthening in the positive Pacific/North American teleconnection and negative Eastern Pacific Oscillation signal in the medium range.”

“With the Madden-Julian oscillation signal projected to fade, this overall pattern type makes sense, although the exact intensity of cold, as well as duration, remains to be determined, as there is no blocking on the Atlantic side to assist in locking in the cold,” Bespoke said. “Either way, it will not be nearly as intense as the cold we saw early this week, but it should keep gas-weighted degree days above normal in the medium range.”

“…we see a continued colder than normal weather pattern over at least the next couple of weeks further fueling concerns over low storage levels, but at the same time, we also see balances that are loosening as the strongest cold is behind us and production gradually recovers from recent freeze-offs.”

U.S. Energy Information Administration

Last week’s Energy Information Administration (EIA) storage report failed to rattle traders with its larger-than-average 149 Bcf withdrawal from stocks that came close to the forecast. The report for the period ending March 1 compares with a 60 Bcf withdrawal for the year-ago period and a five-year average pull of 109 Bcf.

Total Lower 48 working gas in underground storage stood at 1,390 Bcf as of March 1, down 243 Bcf (15%) year/year and 464 Bcf (25%) below the five-year average, according to EIA.

Weekly Forecast

Simply stated, the forecasts show that over the next couple of weeks, temperatures are expected to remain below normal as the inventory deficit is expected to deepen. This should be enough to underpin prices and could be enough to spook a few of the weaker shorts into covering positions.

Last week’s price action suggests investors have built in the cold until March 15. The new forecast for beyond this date will be the catalysts behind the next rally. This should come out on Monday.

We expect to see a steady opening on Monday as prices hover near the May Natural Gas futures contract December high at $2.923. If the buying is strong enough, buy stops could be taken out above this level. This could trigger a move into the next high at $2.960.

If the bullish news fails to materialize, the market is vulnerable for a move back to $2.730.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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