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Natural Gas Price Fundamental Daily Forecast – Predictions of Smaller Storage Deficit Weighing on Prices

James Hyerczyk

Natural gas futures are trading lower early Monday, continuing the steep break from Friday. The bearish price action is being fueled by new forecasts calling for a generally bearish weather conditions through the end of the heating season and predictions of a smaller storage deficit at the start of spring.

“The most recent data continues to suggest a relatively mild pattern will hold over much of the country through the end of the month and into the start of April,” says NatGasWeather. “As such, after next week, weather patterns will be viewed as neutral to bearish unless there were to be notably colder trends.”

At 06:24 GMT, May natural gas futures are trading $2.795, down $0.007 or -0.25%.

Besides the bearish forecast, traders are also anticipating a reduction in the storage deficit by the end of the month.

“The storage deficit versus last year could be cut by nearly half in just two weeks, with the potential for this decline to continue throughout April,” EBW Analytics Group CEO Andy Weissman said on Friday. “As this pattern starts to become clear, the odds are high that Nymex gas futures prices will head lower.”

Daily May Natural Gas

Daily Forecast

It’s early, but this week’s EIA draw is predicted to come in close to the 5-year average of -56 Bcf due to a mix of mild and cool last week.

Last Thursday, the U.S. Energy Information Administration (EIA) said that domestic supplies of natural gas fell by 204 billion cubic feet for the week-ended March 8. That was within range of the 208 Bcf decline forecast by analysts.

Total stocks now stand at 1.186 trillion cubic feet, down 359 billion cubic feet (23.2%) from a year ago and 569 billion cubic feet (32.4%) below the five-year average, the government report showed.

The May natural gas futures chart is bearish. The main trend is down according to the daily swing chart. Today’s early weakness helped form a new lower top at $2.864. A trade through this level will change the main trend to up, but realistically, the buying would have to be strong enough to take out the main top at $2.896 to actually establish a new uptrend. And that’s not likely, given the change in the fundamentals.

The short-term range is $2.765 to $2.864. Its 50% to 61.8% retracement zone at $2.814 to $2.803 is currently being tested.

A sustained break under this zone will indicate the selling is getting stronger. This could trigger an acceleration to the downside with the next target a main bottom at $2.765.

The main range is $2.592 to $2.896. Its retracement zone at $2.744 to $2.708 is the primary downside target.

Look for the selling to begin to accelerate under $2.803. Watch for a short-covering rally if buyers can recover $2.814.

This article was originally posted on FX Empire