Natural Gas Price Fundamental Daily Forecast – Strong National Demand Predicted Due to Frigid Arctic Blasts

Natural gas futures are edging higher on Tuesday after a “gap and go” start to the week. Although the market hit its highest level since December 1 during yesterday’s session, the finish wasn’t very strong. Nonetheless, today’s early price action suggests the presence of speculative buyers.

At 09:45 GMT, January natural gas futures are trading $6.809, up $0.222 or +3.37%. On Monday, the United States Natural Gas fund ETF (UNG) settled at $19.88, up $0.62 or +3.22%.

Monday Recap:  Cold Weather Forecast Fuels 10% Price Jump

January natural gas futures popped more than 10% to their highest level in over a week on Monday, driven by forecasts for colder than normal weather and higher heating demand over the next two weeks.

A gap higher opening was fueled by a change in the forecast over the weekend that predicted a tightening of the supply-demand balance.

The strong performance was also supported by data provider Refinitiv, which forecast 504 heating degree days (HDDs), which are used to estimate demand to heat homes and businesses, over the next two weeks in the Lower 48 United States, compared with a 30-year average of 409 HDDs for the period.

With colder weather coming, Refinitiv projected average U.S. gas demand, including exports, would rise from 123.4 billion cubic feet per day (bcfd) this week to 145.8 bcfd next week.

Short-Term Weather Forecast

NatGasWeather said, “The first in a series of frigid blasts will sweep across the U.S. this weekend with lows of -10s to 20s across the northern ½ of the U.S. and with lows of upper teens to 30s over Texas and the South for strong national demand but not quite as cold as the data once showed.

However, the overnight data was colder trending on an Arctic blast into the U.S. Dec. 12-25 with lows of -20s to -30s over the Midwest and Plains, then spreading eastward.

This system needs very close monitoring since there’s potential the Arctic front advances deep into the southern U.S., particularly Texas, where crippling cold could arrive across ERCOT (Electric Reliability Council of Texas.”

Short-Term Outlook

The weather is the only fundamental to watch this week. It’s going to be cold and demand is expected to increase. The main task is to watch for predictions dealing with the duration of the cold. Of course, the longer the better for bullish traders.

Technically, the main trend is down, but momentum has shifted to the upside due to strong short-covering.

The key area to overcome is a short-term retracement zone at $6.757 to $7.092.

Overcoming $7.092 with conviction could trigger an acceleration into $7.759 to $8.331. A sustained move under $6.757 will be a sign of weakness. This could trigger a break into $6.198.