Natural Gas Price Fundamental Daily Forecast – Updated Weather Forecast Likely to Fuel Volatile Reaction

Natural Gas futures gapped higher on the opening early Monday. An early session surge, however, fell well-short of last week’s high at $4.964. Prices have since been driven back below the opening and are currently in a position to fill the early gap at $4.538 to $4.412. The early session surge was likely in response to conditions over the week-end. The subsequent sell-off was likely fueled by emerging weather reports.

At 0841 GMT, January Natural Gas futures are trading $4.560, up $0.269 or +6.27%.

The Fundamentals

Demand

As of the week-ended November 9, U.S. natural gas supplies in storage stood at 3.247 trillion cubic feet, according to the Energy Information Administration. That was about 16% below the five-year average.

Supporting the market was the news that the withdrawal season, which typically runs from November 1 through March 31, had started with supplies in storage more than 600 billion cubic week below normal. This is the lowest level the market has seen relative to the five-year average in the past 22 years. The previously lowest level was 266 Bcf, reached in 2014.

Supply

The strange thing about the current strength in the market is that it comes at a time when U.S. natural gas production is hitting record levels. The latest EIA forecasts that dry natural-gas production will average 83.2 billion cubic feet a day this year, up 8.5 billion cubic feet a day from 2017. “Both the level and growth of natural-gas production in 2018 would establish new records,” according to the EIA.

Short-Term Weather Forecast

NatGasWeather.com for the period November 19-25 says, “A strong cold blast is currently impacting the central and northern U.S. with lows the next few nights of single digits to 20s north, and 20s to 30s into Texas and portions of the South. The cold front will push through the East Mon-Wed with rain and snow showers. A milder break will set up across much of the country Friday-Sunday before the next weather systems develops over the west-central U.S. late next week-end, then advancing eastward. Milder exceptions this week will be across portions of the West and far southern and southeastern U.S. Overall, demand will be very high.

Forecast

The direction of the next major move in natural gas will likely be determined by the weather forecasts for after November 25. Essentially this is the forecast for the last week in November and the first week in December. If it comes out later day then look for a volatile intraday reaction.

The relative calm at this time is being fueled by the cooling off period tied to last week’s excessive volatility. The forecast for a break in the pattern for November 23-25 may also be capping gains.

Technically, the main range is $3.199 to $4.964. Its 50% to 61.8% retracement zone at $4.082 to $3.873 is support. This zone stopped the selling on Thursday at $3.898.

The new short-term range is $4.964 to $3.898. Its retracement zone is $4.431 to $4.557. The market gapped this zone early Monday. This is now today’s intraday support. If $4.431 fails as support then look for a possible steep break back to $4.082 to $3.873.