Natural Gas Price Fundamental Daily Forecast – Close Over $2.122 Could Trigger Start of Counter-Trend Rally

Natural gas futures hit a new contract low earlier in the session on Friday ahead of today’s U.S. Energy Information Administration (EIA) weekly storage report, due to be released at 15:30 GMT. Prices fell again the previous session on weather related matters.

According to Natural Gas Intelligence (NGI), “A seemingly unwavering warmer-than-normal pattern through the first half of January continued to pressure natural gas futures lower as traders returned to their desks to kick off 2020.”

In other bearish news, spot prices weakened as widespread mild temperatures encouraged discounts for most of the country, including double-digit declines in the Rockies and California. Additionally, NatGasWeather said, “the latest GFS still forecasts an exceptionally bearish pattern through January 15 besides a brief cold shot” for the northern portions of the country around the middle of next week.

At 12:03 GMT, February natural gas is trading $2.113, down 0.009 or -0.33%.

Short-Term Weather Outlook

According to NatGasWeather for January 2-8:  “A rather mild pattern the next several days as high pressure dominates much of the US. There will be a weather system into the central US late this weekend that will then track into the East January 5, although just not very cold. Another system will push into the northern US January 7-8 for a modest bump in national demand. But overall, not cold enough over enough of the country the next 7-days.”

U.S. Energy Information Administration Weekly Storage Report

Looking ahead to today’s EIA weekly storage report, traders are estimating a 65 billion cubic feet draw.

Bloomberg analysts are forecasting a median expectation for a 63 Bcf withdrawal, with predictions ranging from minus 44 Bcf to minus 76 Bcf. Reuters analysts estimate a consensus 57 Bcf pull, with forecasts from minus 25 Bcf to minus 70 Bcf. NGI’s model predicted a withdrawal of 49 Bcf.

Total stocks now stand at 3.250 trillion cubic feet, up 518 bcf from a year ago. The five-year average stands at 3.319 bcf, down 69 bcf, according to the government report.

Daily Forecast

Unless there is a dramatic shift in the bearish weather outlook or a major surprise in the EIA report, traders are likely to take their cues from the daily chart pattern on Friday.

The main trend is down. The downtrend was reaffirmed earlier today when sellers took out Thursday’s low. The main trend will change to up on a move through $2.351.

The market is also trading on the weak side of a downtrending channel with potential resistance angles at $2.126 and $2.166.

Given the prolonged move down, a close over $2.122 will form a potentially bullish closing price reversal bottom. The move won’t change the main trend to up, but it will indicate the buying is greater than the selling at current price levels.