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Natural Gas Price Fundamental Daily Forecast – Shorts Defending $2.685 Ahead of East Coast Winter Storm

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James Hyerczyk
·3 min read
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Natural gas futures are trading lower on Tuesday after a shift in the forecast toward colder temperatures triggered a short-covering rally the previous session. A key technical area stopped the rally, setting up a possible retracement into a support level. Nonetheless, all eyes will remain on the weather forecasts and the possible tightening of the supply/demand picture.

At 12:57 GMT, January natural gas is trading $2.633, down 0.049 or -1.83%.

Spot Gas Prices on the Rise

Rising spot gas prices also provided support at the start of the week as back-to-back weather systems drove up demand in key regions. Driven by multi-dollar gains on the East Coast, Natural Gas Intelligence’s (NGI) Spot Gas National Average jumped 47.0 cents to $3.035.

LNG Demand Remains Strong

Strong demand for liquefied natural gas (LNG) also helped support prices. LNG hit new highs over the weekend and remained strong at the start of the work week. NGI data showed feed gas deliveries to U.S. terminals sitting near 11.5 Bcf on Monday, with some incremental gains possible in the coming months as Cheniere Energy Inc. continues to bring the third production unit at the Corpus Christi terminal into service.

Bloomberg also reported that gas prices in northeast Asia soared past $12 on Monday, driven not only by strong demand but supply disruptions in Australia and Qatar. European prices also have risen, though not as dramatically, amid a shortage of LNG vessels and a quick drawdown in storage inventories.

Additionally, EBW said that PetroChina International Co. Ltd. and China National Offshore Oil Corp. announced Friday they expect to request bids to supply additional cargoes.

Short-Term Weather Outlook

According to NatGasWeather for December 15 -21, “Cool conditions linger across the East in the wake of a weather system that tracked through Monday. A new weather system will strengthen over the South and Southeast today/tonight, then track up the East Coast Wednesday-Thursday with areas of rain and snow, along with chilly highs of 20s to 40s. A third system will bring rain and snow to the Northwest. Overall, stronger demand this week due to numerous weather systems, followed by a milder break over much of the U.S. this weekend into next week with highs of 40s to 70s for a return to light demand. Overall, national demand will be moderate to high through Friday, then back to low.”

Daily Forecast

The early price action suggests futures traders have already priced in the pair of winter storm systems set to drive up spot gas prices.

Looking ahead to Thursday’s EIA storage report, Tudor, Pickering, Holt & Co is saying their early modeling pointed to a 125 Bcf draw versus norms of 120 Bcf. This suggests that the supply/demand balance is tightening.

Technically, resistance is a retracement zone at $2.685 to $2.760. Overtaking the upper level could trigger an acceleration to the upside.

On the downside, the minimum target is $2.538. If it fails to hold then prices could retreat to $2.368, but given the shift in the weather pattern, this is highly unlikely.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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