Natural Gas Price Fundamental Daily Forecast – Downside Momentum Strong Enough to Challenge $2.532
Natural gas futures are trading sharply lower early Friday despite yesterday’s government report that showed a bigger-than-expected draw from storage the previous week. The market is now convincingly below the January 5 bottom at $2.693 with enough downside momentum to make the December 21 main bottom at $2.532 a valid target over the near-term.
At 0952 GMT, March Natural Gas futures are trading $2.628, down $0.70 or -2.60%.
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On Thursday, the U.S. Energy Information Administration reported that natural gas in storage fell 119 Billion cubic feet (bcf) in the week-ended February 2. The withdrawal was more than the 109 Bcf estimate although they ranged from 88 Bcf to 124 Bcf.
The withdrawal was below the 142 Bcf withdrawal reported during the corresponding week in 2017 as well as the five-year-average pull of 151 Bcf, according to EIA data.
As a result, stocks were 503 Bcf, or 19.5%, below the year-ago level of 2.581 Tcf, and 393 Bcf, or 15.9%, below the five-year average of 2.471 Tcf.
Forecast
With the report out of the way, traders are back to watching the weather forecasts. They are showing that temperatures across key demand areas won’t be as cold as previously forecast.
Updated weather models are showing a bearish outlook over the six-to-10-day and eight-to-14-day periods. NatgasWeather.com is saying, “Overall, national demand will be high through Friday-Saturday, then moderate.
The former bottom at $2.693 is new resistance. A sustained move under this level could trigger a further move into the next main bottom at $2.532. Taking out this level will mean the entire winter rally has been wiped out.
Overcoming $2.693 could trigger a short-covering rally, but I don’t expect to see a change in the trend.