Natural Gas Price Fundamental Weekly Forecast – Cold Weather Not Stable Enough to Sustain Rallies

Natural gas futures are trading lower early Monday after nothing significant in the weather department developed over the weekend. The price action is basically an extension of Thursday and Friday’s sell-off. According to the latest models, warmer trends are showing up in the latest forecasts. Not only are futures prices feeling downside pressure, but so are spot prices. On Friday, the Natural Gas Intelligence (NGI) Spot Gas National Average dropped 10.5 cents to $1.705.

Last week, April Natural Gas futures settled at $1.917, up $0.061 or +3.29%. Early Monday, futures are trading $1.879, down $0.038 or -1.98%.

NatGasWeather:  Too Many Mild Breaks to Sustain Rallies

NatGasWeather blamed the price weakness on weather-data that showed late-February cold moderating into March. The forecaster went on to say that the European model lost more than 15 heating degree days (HDD).

The Global Forecasting System (GFS) had already begun to warm in earlier runs but gained back 7 HDDs in Friday’s midday run, though the model is still down more than 30 HDDs from the start of the week, NatGasWeather said. Specifically, the model favors mild conditions returning across most of the United States March 3-6, besides the far northern part of the country.

“It certainly helps the balance has tightened considerably the past few months to provide a floor to prices, but sustained colder-than-normal patterns are required to fully take advantage,” the forecaster said. “Essentially, these bouts of colder air are helpful, but to be full-fledged bullish, there mustn’t be these mild breaks in between, and the weather data keeps disappointing by trending milder in time with longer breaks.”

U.S. Energy Information Administration Weekly Storage Report

The EIA reported Thursday that domestic supplies of natural gas fell by 151 billion cubic feet for the week-ended February 14.

Last year’s withdrawal was 163 Bcf and the five-year average draw is 136 Bcf, according to the EIA.

Total stocks now stand at 2.343 trillion cubic feet, up 613 billion cubic feet from a year ago, and 200 billion cubic feet above the five-year average, the government said.

Weekly Forecast

The main trend is down according to the weekly swing chart. A trade through $1.788 will signal a resumption of the downtrend. The main trend will change to up on a move through $2.447. This is highly unlikely at this time.

The minor trend is also down. The nearest minor top is at $2.204, followed by another minor top at $2.196.

The minor range is $1.788 to $2.024. Its 50% level or pivot at $1.906 is controlling the near-term direction of the market.

A sustained move under $1.906 will indicate the selling pressure is getting stronger. Overtaking this level will signal the return of aggressive counter-trend buyers.

We could see periodic short-covering rallies over the near-term, but without a lingering cold front, any rallies are likely to be stopped by fresh short-sellers.