Natural Gas Fundamental Forecast – January 18, 2017
Natural gas futures retreated from a two-week high on Tuesday despite forecasts for colder temperatures at the end of January.
March Natural Gas futures closed at $3.405, down $0.053 or -1.53%.
Your capital is at risk
Forecast
Once again, it was a combination of technical and fundamental factors that controlled the price action. Technically, the market ran into resistance following a test of a short-term retracement zone at $3.469 to $3.554. This zone is 50% to 61.8% of the last break from $3.828 to $3.110.
The zone will remain resistance until it is taken out and this is not likely to occur unless the weather turns cold in January and into early February. If $3.554 is taken out with conviction, we could see a surge into $3.685. On the downside, the support zone is $3.296 to $3.170.
Fundamentally, we have the weekly storage report and the weather forecasts to deal with in the meantime. This week’s storage report is expected to show a drawdown of about 225 billion cubic feet in the week-ended January 13. Last week’s draw was 151 Bcf in the preceding week, 178 Bcf a year earlier and a five-year average drop of 170 Bcf.
According to the U.S. Energy Information Administration, natural gas in storage currently stands at 3.160 trillion cubic feet, 10.3% lower than levels at this time a year ago and close to 0.1% below the five-year average for this time of year.
Natgasweather.com is currently predicting natural gas demand will be low to very low the next 7-days. Based on the price action, it looks as if investors are already betting on a bullish weather report after that. We’ve seen this before at the start of January so investors are being a little cautious about pushing prices too far ahead of the forecasts.