Natural Gas Price Fundamental Daily Forecast – Weaker as Traders Adjust Positions to Trimmed Demand

Natural gas futures are trading lower on Thursday as investors continue to react to yesterday’s potentially bearish technical chart pattern. The catalyst behind Wednesday’s dramatic reversal to the downside is the return of warmer weather in the latest forecasts. Later today at 14:30 GMT, the government will release its weekly storage report.

“Spot gas prices also started to pull back, namely on the West Coast and farther upstream in West Texas,” Natural Gas Intelligence (NGI) wrote on Wednesday. NGI’s Spot Gas National Average ultimately settled a half-cent higher at $1.580.

At 09:47 GMT, May natural gas futures are trading $1.774, $0.009 or -0.50%.

Before you turn bearish on the market, however, keep in mind that temperatures remain on track to be on the colder side of historical norms in April. Wednesday’s pullback may have just been a reaction to traders adjusting positions to the trimming of some demand over the next couple of weeks.

“But even with a little milder trends in recent runs, the pattern is still solidly bullish/chilly April 10-19 besides a brief break this Sunday,” NatGasWeather said. “It’s now the April 20-23 period that needs to be a little colder.”

U.S. Energy Information Administration Weekly Storage Report

This week’s EIA report, due to be released at 14:30 GMT, is expected to show an injection between 9 and 33 Bcf for the week-ending April 3. As you can see, the estimates are wide this week.

NGI reports that a Wall Street Journal poll of 12 analysts showed estimates averaging at a 21 Bcf build. Respondents to a Bloomberg survey arrived at a similar range, with a median build of 24 Bcf. A Reuters survey also was looking for a 24 Bcf injection, with a 9 Bcf to 34 Bcf build range. NGI’s model estimated the injection at a much larger 37 Bcf.

These figures compare with a 25 Bcf increase in storage in the same week last year and the five-year average injection of 6 Bcf, according to the EIA.

Daily Forecast

A bearish report is likely to spike prices into a potential support area at $1.719 to $1.673. Since the main trend is down, buyers are likely to come in on a test of this area. They are going to try to produce a secondary higher bottom when compared to the multi-year low at $1.521.

A bullish report could lead to a retest of this week’s high at $1.918, but this market isn’t likely to move much higher unless buyers can take out $1.959.

Furthermore, don’t forget about the weather. If the weather models continue to strip out the cold then the market will have a hard time getting off the ground today.

Essentially, we’re likely to see a quick reaction to the EIA report, but the most important report is the weather.