Natural Gas Price Fundamental Weekly Forecast – Setting Up for Sideways Trade

Natural gas futures finished higher last week, mostly supported by speculative bets on increased demand from the East Coast due to winter storms and lower temperatures.

May Natural Gas futures settled at $2.759, up $0.32 or +1.17%.

Prices rose early in the week as weather forecasts showed strong demand with a weather system over the East to the end of last week, and a new one next week. Overall demand was expected to be high due to the presence of two notable weather systems into the eastern U.S.

According to the U.S. Energy Information Administration, domestic supplies of natural gas fell by 57 billion cubic feet (Bcf) for the week-ended March 2. Traders and analysts were looking for a draw of 59 Bcf.

The five-year average withdrawal is 129 billion. Total stocks now stand at 1.625 trillion cubic feet (Tcf), down 680 billion cubic feet from a year ago, and 300 billion below the five-year average, government data showed.

Forecast

The weekly chart pattern and the weather forecasts have been largely behind the current price action.

The weekly chart pattern shows that a potentially bullish secondary higher bottom has formed at $2.600. If this pattern can generate enough upside momentum then the trend will change to up on a trade through $2.951. The downtrend will resume on a move through $2.600.

The market is currently caught between a pair of 50% to 61.8% retracement zones at $2.728 to $2.675 and $2.776 to $2.817. Holding between these zones will create a choppy, two-side trade.

The trigger point for a break out to the upside is $2.817. This level stopped the rally last week. A move through $2.675 will be the first sign of weakness after three weeks of strength.

In other news, CNBC says that U.S. natural gas exporters predict a new boom, thanks to surge in demand from China.

They predict the natural gas boom will be sooner than expected. The U.S. is expected to export 3.6 billion cubic feet of gas a day in 2018, and that should grow to 10 to 12 bcf by the early 2020s, according to an analyst at Tortoise Capital Advisors.

This week’s price action is likely to be dictated by trader reaction to a short-term retracement zone at $2.709 to $2.684. If this area continues to hold then a support base will continue to build. The longer the support base, the bigger the expected rally. Taking out $2.819 will also signal that the buying is getting stronger.

If $2.684 fails as support then look for the market to drift sideways to lower.