Natural Gas Price Fundamental Weekly Forecast – Needs a Lingering Cold Front to Extend Gains
The price action in the natural gas market strongly suggests that investors aren’t sure what to do. The month started out on a high note with a sharp rise from the November 1 low at $2.903 to the November 13 high at $3.321. However, a massive liquidation drove price sharply lower from $3.321 to the November 24 low at $2.903. Enough buyers then came in at $2.903 to drive prices back to $3.218 on November 29.
The price action was wicked because of shifting weather patterns. However, despite the wild swings, the market was still able to post a higher close for the month. This suggests that seasonal buyers are still hoping for a normal winter despite forecasts calling for mild temperatures.
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For the week, January natural gas settled at $3.061, up $0.145 or +4.97%.
According to the U.S. Energy Information Administration, natural gas storage in the U.S. fell by 33 billion cubic feet (bcf) in the week-ended November 24, compared to forecasts for a withdrawal of 37 bcf.
That compared with a drop of 46 bcf in the preceding week, a fall of 50 bcf a year earlier and a five-year average decline of 47 bcf.
Total natural gas in storage currently stands at 3.693 trillion cubic feet (tcf), according to the EIA. That figure is 309 bcf, or around 7.7%, lower than levels at this time a year ago and 107 bcf, or roughly 2.8%, below the five-year average for this time of year.
Forecast
The direction of natural gas prices this week will be determined by whether the cold temperatures in the current forecast actually materialize and if they can be followed up by another cold weather system.
So-called “cold blasts” may trigger fast short-covering rallies, but in order to sustain any rally, these cold blasts are going to have to come in back-to-back or linger around more than just a couple of days.
According to NatGasWeather.com for the December 3 to December 7 time period, a cold weather system will break out of the West and sweep across the country this week. Overall, demand will be low through Monday, then rapidly increasing to high.
The current chart pattern indicates a bullish tone may develop on a sustained move over $3.161 and a bearish bias may develop on a sustained move under $3.023.