Oct 25th - Natural Gas Price Fundamental Weekly Forecast by James Hyerczyk

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Natural Gas Price Fundamental Weekly Forecast – Could Establish Support Base, but Needs Colder Weather for Rally

It is possible for the market to find near-term support, but remain rangebound if November ends up warmer than normal.

James Hyerczyk  Oct 25, 2020 9:58 AM GMT

https://www.fxempire.com/forecasts/article/natural-gas-price-fundamental-weekly-forecast-could-establish-support-base-but-needs-colder-weather-for-rally-679604

Natural gas futures prices retreated last week despite lower natural gas production and stronger export demand. These two factors are likely to be the forces that drive prices higher throughout the winter heating season, but not until the weather starts to cooperate.

Increasing export demand and supportive government storage data should’ve underpinned prices, but a warmer turn in the latest weather forecast capped gains, encouraging bullish traders to trim their lofty long positions.

Last week, December natural gas futures settled at $3.195, down $0.076 or -2.32%.

Short-Term Weather Outlook

Ahead of the weekend, multiple reports were showing hints of warmer weather creeping up in some models, and on Friday, both the American and European datasets trimmed demand from the back of the 11-to-15-day outlook.

Bespoke Weather Services said the models moved toward strong upper-level ridging anchored over the Midwest, suggesting that risks to the current forecast still were to the warmer side after the first couple of days of November. There also was the possibility of a “strongly warm, very low demand pattern” setting up east of the Rockies in the November 5-15 time frame.

Bespoke also said the market still has the coming week’s cold to deal with, especially in the Rockies to Midwest, “but this has been a constant in the forecast for a while now, so should be factored into market sentiment solidly at this point.”

US Energy Information Weekly Storage Report

The EIA reported Thursday that domestic supplies of natural gas rose by 49 billion cubic feet for the week ended October 16. On average, supplies were expected to climb by 51 billion cubic feet (Bcf) for the week, according to analysts polled by S&P Global Platts.

Total stocks now stand at 3.926 trillion cubic feet (Tcf), up 345 Bcf from a year ago and 327 Bcf above the five-year average, the government said.

Weekly Forecast

Declining production and rebounding LNG exports should be enough to underpin prices with $3.146 the first level to watch for support. The weekly chart indicates that the best value area for buyers is $3.004 to $2.917.

Even though we’ve identified the key support areas for the arrival of new buyers, we’ve not sure the buying will be strong enough to trigger a meaningful rally until the weather starts to cooperate.

It is possible for the market to find near-term support, but remain rangebound if November ends up warmer than normal. Right now, two of the three bullish indicators are in place for a rally – LNG demand and lower production – the market just needs a jolt of cold weather to jumpstart the next rally. Until then, we could see a mostly sideways-to-lower trade.

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

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Natural Gas Price Fundamental Daily Forecast – Watch 11-15 Day Weather Forecast for Direction

Early in the session on Monday, traders are showing respect for the technical support area at $3.177 to $3.133. This is a critical support zone.

October 26th am

https://www.fxempire.com/forecasts/article/natural-gas-price-fundamental-daily-forecast-watch-11-15-day-weather-forecast-for-direction-679734

Natural gas futures are trading higher on Monday after finding technical support inside a key retracement zone. The inability to follow-through to the downside earlier in the session after two days of steep declines also suggests that sellers flipped to buyers rather quickly shortly after the opening.

Several factors could be contributing to the early strength. We could be looking at an unexpected jump in LNG exports over the weekend, a bigger than expected drop in production or a major shift in the weather forecasts to colder temperatures

At 08:42 GMT, December natural gas futures are trading $3.230, up $0.035 or +1.10%.

We could also be looking at the potential for heightened volatility ahead of the expiration of the November natural gas futures contract later this week.

Short-Term (7-10 Day) Weather Outlook

According to NatGasWeather for October 23 -29, “Cold air continues across the Rockies and Plains with chilly lows of -0s to 30s. Much of the West and East Coasts will be comfortable with highs of 60s to 80s besides locally hotter 90s over the Southwest. Cold air over the Rockies & Plains will push into Northern Texas today and spread across the Midwest/Great Lakes and east-central U.S. this weekend into next week with lows of 10s and 30s for a swing to stronger national demand. The East will remain mild to warm until late next week when cooler air will finally arrive to drop highs into the 40-50s. Overall, national demand will be increasing to high.”

Intermediate-Term (11-15 Day) Weather Outlook

Ahead of the weekend, multiple reports were showing hints of warmer weather creeping up in some models, and on Friday, both the American and European datasets trimmed demand from the back of the 11-to-15-day outlook.

Bespoke Weather Services said the models moved toward strong upper-level ridging anchored over the Midwest, suggesting that risks to the current forecast still were to the warmer side after the first couple of days of November. There also was the possibility of a “strongly warm, very low demand pattern” setting up east of the Rockies in the November 5-15 time frame.

Bespoke also said the market still has the coming week’s cold to deal with, especially in the Rockies to Midwest, “but this has been a constant in the forecast for a while now, so should be factored into market sentiment solidly at this point.”

Weekly Forecast

Early in the session on Monday, traders are showing respect for the technical support area at $3.177 to $3.133. This is a critical support zone. If sellers take out the last bottom at $3.132, prices could plunge sharply into $3.014 to $2.929.

There is a strong bias to the upside with the hedge funds holding extremely large bullish positions. They are betting on a colder winter.

We’re looking for short-term volatility ahead of the expiration of the November futures contract so don’t be surprised by some wicked two-sided swings.

Longer-term, we believe the market will be well supported by rising LNG exports, lower production and colder temperatures. We also expect the hedge funds to add to their bullish positions on weakness.

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