Natural Gas Price Fundamental Weekly Forecast – Sideways to Lower Until the Next Cold Blast

James Hyerczyk
Updated
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A change in the weather forecast from cold to mild temperatures help drive natural gas futures lower last week. Following a cold blast the previous weekend that helped trigger a 10% rally, prices retreated as the new forecasts called for the return of average to slightly above average temperatures in several key demand areas in the U.S. over the next two weeks.

January Natural Gas futures settled at $3.191, down $0.115 or -3.48%.

In other news, according to the U.S. Energy Information Administration (EIA), natural gas stocks decreased by 18 million cubic feet for the week-ending November 10. Analysts were looking for a draw of between 3 to 15 billion cubic feet (bcf) for an average of 9.

The five-year average for the week is an injection of 15 billion cubic feet. The five-year average for the week is an injection of 15 billion cubic feet, and last year’s storage injection for the week totaled 34 billion cubic feet. Natural gas inventories rose by 15 billion cubic feet in the week-ending November 3.

Natural Gas
Weekly January Natural Gas

Forecast

Last week’s price action suggests investors are trying to build a support base in anticipation of higher prices later this year and into early 2018.

The main trend may be down according to the weekly charts, but the trend is up according to the daily chart. This divergence could cause a choppy, two-sided trade over the near-term as bullish traders await the return of more favorable weather conditions.

The short-term range is $2.983 to $3.321. Its 50% to 61.8% retracement zone at $3.151 to $3.111 is the short-term support zone. To daily chart traders this zone represents value so I believe bullish investors are going to come in to defend this zone in an effort to create a potentially bullish secondary higher bottom.

Evidence that the hedge funds are increasing their long exposure is also a sign that the seasonal bottom may be in and that they are just waiting for the return of cold weather before they add to their bullish position.

The early weather forecast for this week is calling for mild temperatures over the Tuesday to Wednesday period over much of the country, then another cold shot across the northern U.S. later this week. Demand will be increasing to high next week-end.

The key to sustaining the bullish tone over the near-term will be trader reaction to $3.151 to $3.111.

This article was originally posted on FX Empire

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