Natural Gas Price Fundamental Daily Forecast – Edging Higher on Hopes of Colder Near-Term Temperatures

Natural gas futures are trading higher on Tuesday, reversing earlier weakness after successfully testing support at $2.579. The two-sided price action is normal for this time of year due to the fluctuations in the forecasts.

What is impressive about the earlier price action is that it showed that speculative buyers were willing to come in on the dip, preventing another wash-out in the market. This tells me that buyers are looking for value so they can control their risk better. That tends to indicate that professionals are in there.

Buying strength or breakouts over highs or tops tends to indicate that speculators are chasing the market higher. In that case, most of the time, the professionals who bought early are the ones selling to the speculators.

At 13:18 GMT, February natural gas is trading $2.688, up 0.107 or +4.15%.

Short-Term Weather Outlook

According to NatGasWeather for January 5 to January 11, “Weather systems with rain and snow will impact the Rockies and Northeast today, although only slightly cool with highs of 30s to 50s. The rest of the U.S. will be mild with highs of 30s to 50s across the north-central U.S. and 50s to 70s for the far West and southern U.S.

The Rockies weather system will strengthen over the central U.S. Wednesday, then track into the South and Southeast Thursday to Friday with slightly cool highs of 40s and 50s. Light demand this week will increase to moderate Saturday through Monday as lows of 0s to 30s spreads across much of the U.S. besides the far South.”

Bespoke Weather Services Outlook

While the 15-day period as a whole remains “solidly warmer than normal,” a good deal of the warmth has been chipped away, according to the forecaster. Bespoke said it is important to note that the colder changes are focused over the next eight to 10 days. This signals risk that models toward the middle of the month and beyond could be “too warm” given the continuation of the negative blocking. This is being aided by a strong stratospheric warming event currently underway and even some hint at a move toward a slightly negative Eastern Pacific Oscillation as well, according to the forecaster.

“With the look of the pattern, we feel risks are skewed to the colder side of the current forecast, possibly even enough to allow for some colder-than-normal days down the road, as opposed to simply being ‘less warm,’” Bespoke said.

Weekly Forecast

The charts indicate the short-term direction of the February natural gas market this week will be determined by trader reaction to a 50% to 61.8% retracement zone at $2.519 to $2.579.

Look for an upside bias on a sustained move over $2.579, which could put a recent top at $2.775 back on the radar, but the downside bias will resume on a sustained move under $2.519.