Natural Gas Price Fundamental Daily Forecast – Slight Shift in Weather Outlook Triggers Short-Covering Rally
Natural gas futures are trading higher early Wednesday after spiking higher on Tuesday. Earlier in the week, sellers were in control with the market seemingly on a path toward a key support area and potential buy zone, but a shift in the weather forecast helped shake the tree a little, sending short-sellers scurrying for the exit.
At 0836 GMT, December Natural Gas futures are trading $3.229, up $0.041 or +1.29%.
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The new weather outlook calls for colder trends overnight for the second week of November book-ended by milder spells.
NatGasWeather.com for October 31 to November 5 forecasts, “Warm high pressure will strengthen across the eastern and southern U.S. Wednesday-Thursday with highs of 50’s to 80’s, hottest over the Southeast. A weather system with heavy showers will push into the central U.S. & Midwest with rain and snow, and slightly chilly conditions as lows drop into the 20s to 40s. This system will track into the East Fri-Sat for a swing to stronger demand. California and much of the West will be mild to warm. Overall, swings in national demand the next 7-days, averaging out to moderate.”
Forecast
The spike in prices on Tuesday was a surprise because the weather forecast didn’t change by much. It may have just been a reaction to oversold technical conditions.
Despite the rally, the main trend is still down according to the daily swing chart. It will change to up on a move through $3.314. If this occurs then we’ll have to take the rally more seriously.
Since the main trend is down, we’re still going to be looking for a break into $3.125 to $3.057. We’re not looking to chase short-covering rallies especially since the weather remains relatively mild. We’re only going to believe in a breakout to the upside if a cold weather forecast supports the move.
Otherwise, we prefer to look for value and the value zone comes in at $3.125 to $3.057.
According to some reports, we may not see lingering cold temperatures until after November 13.
In other news, this week’s U.S. Energy Information Administration’s weekly storage report is expected to show an injection of about 53 billion.