Natural Gas Price Fundamental Daily Forecast – Strengthens Over $1.851, Weakens Under $1.801

Natural gas futures are trading lower on Thursday but rebounding after touching an important short-term technical support level shortly before the regular session opening and the U.S. Energy Information Administration’s (EIA) weekly storage report at 14:30 GMT. Traders are blaming yesterday’s weakness and today’s follow-through to the downside on economic uncertainty after the World Health Organization (WHO) declared the coronavirus outbreak a pandemic.

At 12:01 GMT, May natural gas futures are trading $1.834, down $0.088 or -4.58%.

Weather may have moved to the forefront again on Wednesday/Thursday with concerns over production taking a backseat after a tremendous two day short-squeeze.

Natural Gas Intelligence said, citing EBW Analytics Group, the rally for natural gas to start the week reflects “a belief that steep” capital expenditure cuts from U.S. shale producers “will result in quick, steep declines in production of associated gas, tightening the natural gas market.”

“In addition, with a massive short position still outstanding, short-covering may also have played an important role.”

Bespoke Weather Services said in a note following Wednesday’s close, “The curve structure today was not nearly as foolish as the last couple of days, but the underlying issues remain the same.”

They further added, “The pattern remains warm, despite cold in the western half of the nation, and balances remain in a state that we would consider bullish at these price levels. The problem is, first of all, we have rallied a significant amount since Monday morning, so we were due for a breather, and we also do not know how much demand will be destroyed by cancellation of events due to the coronavirus.”

U.S. Energy Information Administration Weekly Storage Report

The EIA report is expected to show a lighter-than-average weekly withdrawal from U.S. natural gas stocks on Thursday. A Bloomberg survey Wednesday showed a median 56 Bcf pull, while a Reuters poll landed on a withdrawal of 59 Bcf.

Natural Gas Intelligence’s model predicted a 51 Bcf withdrawal for the EIA report, which covers the week-ended March 6. Estimates as of Wednesday ranged from minus 49 Bcf to minus 66 Bcf.

Last year, EIA recorded a 164 Bcf pull for the similar week, and the five-year average is a withdrawal of 99 Bcf.

Daily Forecast

We understand the mixed messages from the news, but we’re going to focus on the chart pattern.

The main trend is up according to the daily swing chart. The main range is $2.229 to $1.657. Its retracement zone at $1.943 to $2.010 is resistance.

Wednesday’s rally stopped at $2.044, just below the recent top at $2.060. This price is the trigger point for an acceleration to the upside.

The short-term range is $1.657 to $2.044. Its retracement zone at $1.851 to $1.805 is potential support. Today’s intraday low is $1.801, so this zone provided support.

Based on the early price action, the direction of the May natural gas futures contract the rest of the session on Thursday is likely to be determined by trader reaction to the short-term 50% level at $1.851 and the 61.8% level at $1.805.

A sustained move over $1.851 could lead to a retest of $1.943 to $2.010.

A sustained move under $1.805 could lead to a retest of $1.657 over the near-term.