Natural Gas Fundamental Forecast – January 17, 2017
Natural gas futures posted a relatively small gain on Monday as investors continued to react to forecasts for colder temperatures into the end of January while continuing to react to last week’s strong storage draw. Volume was light due because of a U.S. bank holiday due to Martin Luther King Day.
March Natural Gas futures closed at $3.458, up $0.062 or +1.83%.
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The move was also a continuation of last week’s rally which saw the futures contract add 3.28% due to a bigger-than-expected weekly storage draw and cold forecast.
Forecast
The trend is down according to the daily chart, however, momentum has been trending higher since January 9 when the market reached a low of $3.110. The recent break from $3.828 to $3.110 created a retracement zone at $3.469 to $3.554. This zone is currently being tested.
How investors react to $3.469 to $3.554 will determine the direction of the market over the near-term. If the weather forecasts continue to point towards cold temperatures, March natural gas prices should continue to rally with $3.685 the first key target.
If the weather forecasts take the cold out then $3.469 to $3.554 should become new resistance, setting in motion a potential break back to $3.296 to $3.170.
Looking ahead to Thursday, January 19, the U.S. Energy Information Administration’s weekly inventory report is expected to show a draw of about 225 billion cubic feet for the week-ending January 13. This compares with a withdrawal of 151 Bcf in the preceding week, 178 billion a year earlier and a five-year average drop of 170 Bcf.
Additionally, total natural gas in storage currently stands at 3.160 trillion cubic feet. This is 10.3% lower than levels at this time a year ago and around 0.1% below the five-year average for this time of year.
According to natgasweather.com, overall natural gas demand will be low the next 7-days. However, the main focus for traders will be on the last week in January into early February and a colder weather system that may be moving into the northern and eastern U.S.