Natural Gas Prices Forecast: Selling Pressure Eases as Market Nears Key Support Area

Highlights

• Traders clawing back early losses ahead of test of key support zone. 
• Reaction to $3.002 – $2.991 support cluster to determine near-term tone. 
• Fundamental outlook remains bearish with bearish weather reports and low demand expectations capping gains. 

Overview

U.S. natural gas prices are trading flat after clawing back an earlier loss. The price action suggests the market may be running out of short-sellers, making it ripe for a daily reversal, however, it’s too early to tell without a sizeable jump in trading volume.

At 13:09 GMT, December natural gas futures are trading $3.124, up 0.018 or +0.58%.

The market is currently in a position to finish the week sharply lower. The selling pressure has been driven by mostly bearish weather reports that are hurting demand, and a jump in production.

Warm Weather Weighs on Demand

As far as the weather is concerned, according to NatGasWeather for November 9 to 15, “Temperatures will be warmer versus normal over the southern and eastern US today with highs of 50s to 80s. The Northwest, Mountain West and Plains will be mild as weather systems track through with showers and highs of upper 30s to 50s.

A cool shot will sweep across the northern and central US Friday through Sunday with highs of 30s to 50s, lows of teens to 30s for near seasonal national demand, then warming back above normal next week.

Overall, low demand today, increasing to moderate Friday thru Sunday, then back to low next week.”

No EIA Report Today

NatGasWeather says, “While the EIA weekly storage report has been postponed until next week, we anticipate surpluses would have dropped from +205 Bcf to around +165 Bcf if it were announced due to last week’s frosty cold shot that impacted much of the US. However, with recent and coming warmth, surpluses are expected to increase back to near or over +225 Bcf.”

Technical Analysis

US natural gas is inching higher shortly after the New York opening on Thursday. However, the tone of market remains bearish following Monday’s gap lower opening and subsequent follow-through to the downside.

The daily chart indicates that the key downside target is a price cluster formed by a minor support level at $3.002 and the 50-day moving average at $2.991.

With the main trend up, we’re looking for buyers to re-emerge on a test of $3.002 to $2.991. If successful, this could produce a meaningful short-covering rally.

However, if $2.991 fails to hold, we could see an acceleration to the downside with the next major target the support level at $2.838.

On the upside, trader reaction to resistance at $3.184 will set the tone. While we don’t expect a strong rally following a breakout over this level, we do think it may be necessary to relieve some of the downside pressure.