Natural Gas Price Fundamental Daily Forecast – Short-Covering Fueled by Expectations of Cold Temperatures

Natural gas futures are edging higher at the mid-session on Friday after recovering from an early session loss. The price action is being fueled by “significant model differences on the intensity of cold later this month,” according to Natural Gas Intelligence.

The American model trended colder overnight, but the milder European model remained “basically unchanged” from Thursday’s outlook, widening the gap between the two datasets, according to Bespoke Weather Services.

At 15:21 GMT, December natural gas futures are trading $2.529, up $0.013 or +0.52%.

Bespoke Weather Services Outlook

“Both models do feature the ridge west/trough east look through days eight through 15,” but the American model is stronger than the European with the pattern, Bespoke said. “As is often the case, the answer likely lies in the middle, which is where we put our official forecast.”

“We do still see lower demand days this weekend into the first half of next week before the cold arrives, taking demand above normal next weekend into the following week. We also continue to favor a colder start to November but still are not convinced that cold lasts beyond the first week of the month.”

U.S. Energy Information Administration

On Thursday, the EIA reported a 104 Bcf injection into natural gas storage inventories for the week-ending October 11, marking the third time in four weeks that stocks have risen by at least 100 Bcf. Traders were expecting a triple-digit build and the actual number fell inside the expected range.

Last year’s EIA report came in at 82 Bcf. The five-year average injection is 81 Bcf.

Total working gas in storage ended the period at 3,519 Bcf, 494 Bcf above year-ago levels and 14 Bcf above the five-year average.

Daily Forecast

The main trend is down, but momentum has been trending higher since October 11, following the formation of the closing price reversal bottom at $2.388.

The short-term range is $2.568 to $2.388. Its 50% level or pivot at $2.478 has been providing support all week.

Look for an upside bias on a sustained move over $2.478, and for an acceleration to the upside if buyers can take out $2.564 and $2.568. This could trigger a surge into the main retracement zone at $2.636 to $2.695.

A downside bias will develop if $2.478 fails. If this creates enough downside momentum then look for the selling to possibly extend into the main bottoms $2.388 and $2.371 over the near-term.