Natural Gas Price Fundamental Weekly Forecast – Bulls Playing Waiting Game with Weather

Natural gas futures are trading slightly lower for a third session on Monday as traders continue to digest the latest weather forecasts that suggest a warm November after an initial cold spell. Gains are also being capped by a rise in production as well as a tightening in the supply deficit. Worries about Europe being undersupplied this winter are also being dampened by the pledge from Russia to supply the area with gas.

At 13:21 GMT, December natural gas futures are trading $5.376, down $0.050 or -0.92%.

Technically, buyers came in at $5.270, slightly above the main 50% level support at $5.269. This is the last support before the $5.070 main bottom. The price action suggests traders see this area as value and may be defending it against a change in trend.

Short-Term Weather Outlook

According to NatGasWeather for November 1-7, “A chilly weather system with rain and snow showers will track across the Midwest and Northeast this week with highs of 40s-50s and lows of 20s-30s, including rain and snow with lows of 30s dropping down the Plains into Northern Texas, aiding strong national demand.

“A milder system will track into the West mid-week with highs of 50s and 60s. The southern U.S. will be comfortable with highs of 60s and 70s. National demand will ease to lighter levels next weekend as high pressure with mild highs of 50s to 70s expands across much of the U.S. besides the mild to cool Northwest and Northeast as weather systems bring shows and highs of 40s and 50s.”

Energy Information Administration Weekly Storage Report

The EIA reported last Thursday that domestic supplies of natural gas rose by 87 billion cubic feet (Bcf) for the week-ended October 22. That was a bit less than the average increase of 90 Bcf forecast by analysts polled by S&P Global Platts.

Total stocks now stand at 3.548 trillion cubic feet (Tcf), down 403 Bcf from a year ago and 126 Bcf below the five-year average, the government said.

Looking ahead to this week’s report, TPH’s preliminary model points to a 70 Bcf build versus the five-year average 38 Bcf injection. From there, the firm expects the market to shift into an early seasonal draw in November on the upcoming cold front.

Daily Forecast

Fundamentally, weather models over the weekend “failed to show anything colder for the 16-20 day period, making the mid-November pattern not nearly as cold as needed to intimate,” NatGasWeather said.

Along with warm forecast trends, EBW Analytics Group analysts highlighted “strong production indicators” last week and “inconsistency” in liquefied natural gas feed gas demand as potential contributing factors to price weakness to open the week.

The main trend is up according to the daily swing chart. A trade through $6.281 will signal a resumption of the uptrend. A move through $5.070 will change the main trend to down.

The short-term range is $5.070 to $6.281. On Friday, the market closed on the weak side of its retracement zone at $5.514 to $5.652, making it resistance.

The intermediate range is $6.593 to $5.070. Its retracement zone at $5.832 to $6.011 is additional resistance.

The main range is $3.944 to $6.593. Its retracement zone at $5.269 to $4.956 is the next major downside target zone. This zone stopped the selling at $5.070 on October 19.

Buyers could come in on a test of $5.269 to $4.956.

There is some risk to the downside, however. Big sell stops could be waiting under $4.879.

We’re not likely to see the start of a significant rally until the first solid cold front hits the country.