Natural Gas Price Fundamental Daily Forecast – Must Hold $4.082 to $3.873 Retracement Zone or Winter Rally Could Be Over

Natural gas prices are trading higher Thursday, shortly after the regular session opening and ahead of the release of the U.S. Energy Information Administration’s weekly storage report. The market was pressured early but reversed to the upside on position-squaring ahead of the report. Volume and volatility are below average at this time, but should pick up once the report is released at 1530 GMT.

At 1351 GMT, January Natural Gas futures are trading $4.235, up $0.099 or +2.39%.

Despite forecasts calling for cold leading up to Christmas, gains continue to remain capped and prices pressured because of uncertainty over whether the colder temperatures will continue into the new year.

 NatGasWeather

According to NatGasWeather.com for the period December 13 to December 19, “A strong weather system will sweep across Texas and the South today into Friday with areas of rain, locally as snow, then across the Southeast Friday and Saturday. The rest of the country from Friday into early next week will be mostly mild with highs of 40s and 50s across the northern tier and 60s, to locally 70s elsewhere. A fast moving weather system will race across the Northeast early next week with colder temperatures but remaining mild over the rest of the country. Overall, national demand will be moderate.”

Further out, the weather forecaster is saying there is still a decent shot of cold into the United States December 23-24 but with conditions moderating across the important eastern part of the country for December 25-27. “Essentially, after teasing colder patterns to open the week for the last week of December, the weather data has backed off some. It’s still a cool pattern, just not impressively cold,” NatGasWeather said.

U.S. Energy Administration Report

Estimates are calling for a withdrawal in the low to mid-80s Bcf range. Bloomberg is predicting a withdrawal range of 72 Bcf to 95 Bcf, and a median of 85 Bcf. Reuters is looking for a withdrawal range of 74 Bcf to 102 Bcf, and a median of 84 Bcf.

Forecast

Short-term traders are paying close attention to the market’s reaction to a major retracement zone. Technically, the main range is $3.199 to $4.964. Its 50% to 61.8% retracement zone is $4.082 to $3.873. Inside this zone is a minor bottom from November 26 at $4.038.

Earlier today, the January Natural Gas futures contract rebounded from a test of $4.050.

Essentially, this retracement zone has to hold as support or the winter rally could be over. That’s how important holding $3.873 has become.