Natural Gas Price Fundamental Daily Forecast – Direction Will Be Determined by Trader Reaction to $1.881 Pivot

Natural gas futures are trading lower shortly after the cash market opening and the U.S. Energy Information Administration’s weekly storage report at 15:30 GMT.

Technically, aggressive counter-trend traders have been trying to trigger buy stops at around $1.881 in an effort to fuel a breakout to the upside. Fundamentally, shifting weather forecasts have been no help to the bullish traders.

At 15:06 GMT, March natural gas futures are trading $1.848, down $0.013 or -0.70%.

U.S. Energy Information Administration Weekly Storage Report

The price action suggests that traders are expecting a lighter-than-average withdrawal. According to Natural Gas Intelligence, estimates have been pointing to a withdrawal in the upper 120s Bcf to lower 130s for this week’s EIA report.

Bloomberg is looking for a range of 122 Bcf to 134 Bcf, with a median pull of 129 Bcf. Reuters forecasts a median draw of 131 Bcf. The Wall Street Journal predicts a draw as low as 109 Bcf, but its average is 127 Bcf. Meanwhile, the Natural Gas Intelligence model predicts a 125 Bcf withdrawal.

In 2019, the EIA recorded a 228 Bcf withdrawal for the similar period, while the five-year average withdrawal is 143 Bcf.

Short-Term Weather Forecast

According to NatGasWeather for February 6 to February 12, “A strong weather system will track through the South and East today with areas of rain and snow, although with only modest cooling. A reinforcing cold shot will follow across the Northeast Friday – Saturday for a bump in national demand as lows each the 10s & 20s. Additional weather systems are expected into the US next week, but coldest over the lower population Rockies and Plains. The southern U.S. will cool into the 40s to 60s the next couple days, then warming back into the 60s and 70s. Overall, light vs normal national demand continue.”

Daily Forecast

I’m not sure how traders will react to the EIA numbers, but the daily chart indicates the key price level to watch is $1.881.

A sustained move under $1.881 will indicate the presence of sellers. If this generates enough downside momentum then look for the selling to possibly extend into this week’s low at $1.804. Taking out this level could trigger an acceleration to the downside since it will indicate that short-sellers are still in control and willing to press the market further. At the same time, it could represent another batch of longs throwing in the towel on a rally this winter season.

A sustained move over $1.881 will signal the presence of buyers. This could trigger the start of the massive short-squeeze the market has been anticipating for weeks. The first target is the price gap at $1.963 to $1.977, followed by the retracement zone at $2.004 to $2.051.