Natural Gas Price Fundamental Daily Forecast – Pressured by Warm Weather Forecasts
Natural gas futures are trading lower on Friday as traders price in a forecast calling for warmer temperatures beginning next week. Although the wide storage deficit is still intact, the news of improving weather conditions is forcing bullish traders to reconsider holding onto profitable positions at current price levels. Furthermore, the news is attracting hedgers who are looking to take advantage of these favorable prices.
At 0745 GMT, January Natural Gas is trading $4.267, down $0.060 or -1.34%.
Your capital is at risk
Basically, the tight supply is likely to keep prices bid at times, which could trigger periodic rallies, however, as long as the medium to long-term forecasts are showing warmer temperatures, there is risk to the downside.
Today’s U.S. Energy Information Administration (EIA) weekly storage report is not expected to have too much of an impact on the market today unless it is a bad miss because we are in a weather market. Estimates are hovering around the mid-60 Bcf range. If it comes in around this figure then it would widen the deficit to one-year ago levels, but keep the deficit to the five-year average relatively steady.
Bloomberg is looking for a withdrawal range of 51 Bcf to 77 Bcf, with a median draw of 63 Bcf.
Reuters estimates a withdrawal range of 57 Bcf to 77 Bcf with a median draw of 64 Bcf.
Last year, the EIA report recorded a 3 Bcf withdrawal for the period, and the five-year average is a withdrawal of 58 Bcf.
Look for a bearish tone on a sustained move under $4.431. If the downside momentum continues then we’re likely to see a move into the main retracement zone at $4.082 to $3.873. Furthermore, taking out $4.038 will change the minor trend to down.
The market will start to strengthen over $4.431, but don’t expect an upside breakout unless $4.557 is taken out.