Natural Gas price forecast – Can buyers dominate?


This week has been red for Natural Gas market. Usually around this time of the year, prices peak and we see a new high every year. Last year around this time, shorts were squeezed out of the market when NG prices were trading at 360 on MCX.  In international markets, prices touched almost $4.00 and all shorts positions were squeezed out of the markets.

Generatebucks - Natural Gas Prices Forecast
Generatebucks - Natural Gas Prices Forecast
Natural gas is a seasonal commodity and prices are directly proportional to the demand. Mostly around this time of the year entire US welcomes heavy winter. This year due to low demand and warmer weather forecast, prices have been trading in oversold zone.

Early hits morning Natural gas prices opened in green zone but with lack of interest from buyers, prices move down.

Prices trading around support

Natural Gas prices have been trading around support for few weeks.  The 181 level is a major psychological support. If you look at international markets, 2.50 acts a major support zone. Buyers tend to jump around this point since this is considered an oversold zone.

A pull back is overdue since demand seems to be low but we can expect prices to touch $2.75 and if this resistance breaks than we can expect prices to trade to $3.00. With seasonal demand and favorable weather forecast, we can expect prices to trade above $3.00 as well.

Short-term weather forecast

According to NatGas Weather for November 21 – 27, US will be mild to warm today with highs of 60s & 70s, warmest over Texas and the South, then cooling as the western US system tracks through Friday, eventually reaching the East this weekend. High pressure will bring warmer conditions over the eastern half of the country next week as cold air pours into the West. Overall, moderate demand.

Natural Gas EIA Report

Today’s EIA report will kick-off the withdrawal season. Traders are saying today’s report that covers the week-ended November 15 is likely to show a much larger-than-average withdrawal in the upper 80s Bcf. A consensus of analysts is pegging 86 Bcf as the over/under level.

Bloomberg analysts were looking for a median prediction of 88 Bcf, with estimated withdrawals ranging from 82 Bcf to 99 Bcf. The ICE EIA Financial Weekly Index futures settled Tuesday at minus 87 Bcf. Natural Gas Intelligence (NGI) was predicting a 101 Bcf withdrawal.

Working gas in storage was 3,638 Bcf as of Friday, November 15, 2019, according to EIA estimates. This represents a net decrease of 94 Bcf from the previous week. Stocks were 506 Bcf higher than last year at this time and 60 Bcf below the five-year average of 3,698 Bcf. At 3,638 Bcf, total working gas is within the five-year historical range.

The numbers released will definitely support prices but demand has to grow significantly for a big rally.

Natural Gas price forecast and trading tip

With low demand and warmer weather forecast, I am not expecting a rally yet. For a significant rally or prices to take a huge jump, weather should favorable and demand should increase.

Despite Natural Gas prices trading in oversold zone, I don’t see too much greenery in this market. Based on the next weather forecast and EIA report, buyer might show interest and a rally could happen

I would suggest buyers to stick around and buy on any dips since a rally is overdue and will happen. I see Natural gas prices to trade around 230 with demand increasing in coming weeks.

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