Natural Gas Price Fundamental Daily Forecast – Lingering Cold Could Lead to Further Upside Action

James Hyerczyk
Updated
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Natural gas prices continued to rally on Friday following the previous day’s 6.66% surge. Despite a U.S. government report on Thursday showing that natural gas supplies in storage in the U.S. declined slightly less than expected last week, prices firmed due to concerns over lingering cold temperatures in key demand areas in the U.S.

On Friday, February Natural Gas futures settled at $2.953, up 0.039 or +1.34%.

Natural Gas
Daily February Natural Gas

On Thursday, the U.S. Energy Information Administration reported that natural gas storage fell by 112 billion cubic feet in the week-ended December 22. Traders were looking for a decline of 113 billion.

That compared with a draw of 112 billion cubic feet (bcf) in the preceding week and represented a decline of 62 billion from a year earlier and was 85 bcf below the five-year average.

Total U.S. natural gas storage stood at 3.332 trillion cubic feet, 1.8% below levels at this time a year ago and 2.5% below the five-year average for this time of year.

According to NatGasWeather.com for the period December 31 to January 5, “Artic blasts will sweep across the northern, central and eastern U.S. through next week with lows of -25 degrees Fahrenheit to teens. Subfreezing air will also advance deep into the southern U.S., while the West will see a mix of cool and mild. Most importantly, very cold temperatures will continue over the North and East, especially around the New Year’s for very high natural gas demand.

Technically, the main trend turned to up according to the daily swing chart on December 28 when buyers took out the previous main top at $2.789. This price is new support. A break back under this level will indicate that the breakout to the upside was triggered by buy stops and short-covering rather than new buying.

The short-term range is $3.210 to $2.562. Its retracement zone is $2.886 to $2.962. Natural gas broke through this zone last week, but settled inside it.

The main range is $3.320 to $2.562. Its retracement zone at $2.941 to $3.030 was tested on Friday. The market settled inside this zone.

The direction of the market next week will be determined by trader reaction to this pair of retracement zones.

Based on Friday’s close at $2.953, support is a pair of 50% levels at $2.941 and $2.886. Holding above these zones will indicate the presence of buyers. If $2.886 fails then look for a possible break back to $2.789.

Resistance is a pair of Fibonacci levels at $2.962 to $3.030. Overtaking $3.030 will indicate the buying is getting stronger. This could trigger another breakout to the upside.

This article was originally posted on FX Empire

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