Natural Gas Price Fundamental Daily Forecast – Weather Driven; Strengthens Over $2.678, Weakens Under $2.630

Natural gas futures are edging higher for a second session on Tuesday on expectations of a jump in heating demand over the near-term and forecasts calling for colder temperatures into the weekend and possibly the first week of February.

Nonetheless, bullish speculators are still approaching the long side of the market with caution. Analysts at The Schork Report said, “The fact traders are unwilling to pay a premium to own gas for the final two delivery months of winter is as fundamentally bearish as it gets,” given that gas demand is typically the strongest in winter.

Natural Gas Intelligence (NGI) reported that observers said hints of a cold finish to winter, however, were enough for futures to reverse course on Monday. “The supply/demand balance remains tight for when weather cooperates,” NatGasWeather said.

At 13:39 GMT, March natural gas futures are trading $2.631, up $0.033 or +1.27%.

Cash Market Rises

Spot gas prices cruised higher across the Lower 48 as colder conditions swept across the West and Midwest, bringing lows near zero on Monday in northern markets such as Minneapolis, NGI reported. Forecasts showed the cold wave moving east as the week progresses.

NatGasWeather called it “a messy” pattern this week “as numerous weather systems track across the country with rain and snow…As this system finally tracks through the East mid-week, colder air over the Midwest will spread south and eastward with lows of 0s to 30s for stronger national demand.”

According to NatGasWeather for January 26 to February 1, “A weather system will track across the Southwest today with rain and snow, while a second system brings snow to the Great Lakes/Mid-Atlantic. The northern U.S. will be cool to cold with highs of 20s to 40s for strong demand, although countered by comfortable highs of 60s to 80s across the South and Southeast. Colder air with lows of 10s to 30s will spread across the eastern U.S. Wednesday to Friday for the strongest demand of the week. National demand will ease this weekend as warm high pressure builds across the central and southern U.S. Overall, national demand will be moderate to high over the next 7-days.”

Daily Forecast

The daily chart indicates the direction of the March natural gas futures contract over the short-term will be determined by trader reaction to the retracement zone at $2.630 to $2.678.

A sustained move under $2.630 will indicate the presence of sellers. If this move generates enough downside momentum then look for a possible correction into $2.552 to $2.485.

Overtaking $2.678 will indicate the buying is getting stronger. This could trigger an acceleration to the upside with the next potential target a major 50% level at $2.794.