Natural Gas Price Fundamental Daily Forecast – Underpinned by Firm Cash Prices, Capped by Record Production

Natural gas prices are inching lower on Wednesday, shortly after the cash market opening. The overnight trade was a little tentative as prices remained inside Monday’s wide range although near the lower end of the trading range. The price action suggests the selling is slowing as the market approaches Monday’s low at $2.413 and the October low at $2.388.

At 12:01 GMT, December natural gas futures are trading $2.428, down $0.021 or -0.86%.

The market finished slightly higher on Tuesday, failing to follow-through to the downside after a steep sell-off the previous session.

Helping to underpin prices and dampen the selling pressure are strong cash prices and supportive weather data.

According to Natural Gas Intelligence, “Cash prices continued to strengthen as a strong weather system tracked across the Midwest and into the East with rain and snow, while others were fresh on its tail. One glaring exception to the overall market strength was in the Permian Basin, where prices once again plunged below zero.”

Short-Term Weather Outlook

According to NatGasWeather for October 23 to October 29, “As one weather system exits the East, a new weather system and associated cold shot will dive down the Rockies & Plains today, then deep into Texas and the South Thursday with heavy showers. Lows behind these two systems will be in the 20s and 30s, coldest over Rockies and North Plains.”

“The rest of the southern US will be mostly comfortable with highs of 60s to 80s for light demand. A break between weather systems will occur over the southern and eastern US Sunday through Monday as highs warm into the 60s and 70s. At the same time, the coldest system in the coming series will arrive into the Rockies & Plains with lows of 10s to 30s for strong demand. Overall, national demand will be moderate to high, then high to very high mid-next week.”

Daily Forecast

NatGasWeather is asking the question, “While a week of solid cold is helpful, is it going to be enough to resume the strong rally if warming quickly follows, especially when considering yet another record in production?”

This question suggests traders will take a neutral stance toward the market on Wednesday, and may have decided to wait until they see the government storage figures on Thursday before making their next move.

The short-term range is the October 4 top at $2.568 and the October 11 bottom at $2.388. This makes its 50% level or pivot at $2.478, the key level to watch for direction.

Basically, look for a downside bias on a sustained move under $2.478 with $2.388 to $2.371 the next major targets. Overcoming $2.478 will indicate the short-covering is getting stronger. But bearish traders won’t have to worry about the long side unless the buying is strong enough to take out $2.568.