Natural Gas Price Fundamental Weekly Forecast – Weakens Under $2.622, Strengthens Over $2.706

Natural gas futures edged lower last week as a late-session cold snap provided some support as well as firm liquefied natural gas (LNG) exports and a somewhat bullish U.S. Energy Information Administration (EIA) weekly storage report.

Last week, May natural gas futures settled at $2.639, up $0.020 or +0.76%.

As far as the weather is concerned, helping to underpin prices was a report from the National Weather Service (NWS) that said record-cold high temperatures may be in store for parts of the Southeast northward to the Northeast through the weekend.

The NWS also issued freeze warnings across the Middle Mississippi Valley, Tennessee, Lower Ohio Valleys and Southeast and Mid-Atlantic parts. Meanwhile, lows were forecast to dip to near freezing as far south as central Georgia and southern South Carolina.

US Energy Information Administration Storage Report

The EIA reported on Thursday that domestic supplies of natural gas rose by 14 Bcf for the week-ended March 26. That compares with an average increase of 19 Bcf forecast by analysts polled by S&P Global Platts.

Ahead of the EIA weekly storage report, Natural Gas Intelligence (NGI) reported that its model predicted a build of 18 Bcf. A Bloomberg survey showed a median 19 Bcf injection prediction, based on estimates ranging from injections of 13 Bcf up to 41 Bcf. A Reuters weekly poll produced the same range injection estimates, with a median increase of 20 Bcf.

Last year, the EIA recorded a 20 Bcf withdrawal for the period, while the five-year average is a pull of 24 Bcf.

Total stocks now stand at 1.764 trillion cubic feet, down 225 Bcf from a year ago and 36 Bcf below the five-year average, the government said.

Weekly Weather Outlook

According to NatGasWeather for April 5 to April 11, “A very light demand pattern remains on tap for this week as high pressure rules much of the U.S. with highs of 50s to 70s across the northern U.S. and 70s and 80s across the southern U.S. Slightly cooler expectations will occur over the Northwest and Northeast early in the week due to lingering weather systems, while hotter exceptions are expected over the Southwest deserts into South Texas with highs of upper 80s to 90s. The Northern system will track into the Plains, then across the Great Lakes mid-week but still quite mild with highs of 50s and 60s. Overall, very light demand this week.”

Weekly Forecast

The price action the past three weeks suggests the direction of the May natural gas market will be determined this week by trader reaction to $2.622.

Look for a bearish tone to develop on a sustained move under $2.622. This could trigger a break into $2.574 to $2.546. Counter-trend buyers could come in on a test of this zone, but if $2.546 fails then look for a potential acceleration to the downside with $2.459 the next major downside target.

A sustained move over $2.622 will indicate the presence of buyers. This could trigger an acceleration to the upside with targets coming in at $2.688 and $2.706. The latter is a potential trigger point for an acceleration to the upside.