Price-action of the natural gas futures speaks volumes about the forthcoming directional moves of the commodity in the short-term. Meanwhile, fundamentals indicate the long-term direction of natural gas prices. While trading the most liquid commodity of the world, the need of the hour is to have a little patience and quick decision-making to trade the commodity. Traders generally remain anxious while taking a long or short position in natural gas futures.
The EIA reported inventory data for the week ending on Nov. 18 on Wednesday, Nov. 24, one day earlier this week because of the Thanksgiving holiday. The chart shows December futures settled at $5.447 per MMBtu, Nov. 26, after testing the day’s high at $5.562 and the day’s low at $4.983. There was a strong reversal on Nov. 26, which looks evident enough for a breakout during the upcoming weeks.
Natural gas futures look attractive for bulls in a weekly chart after the formation of a green candle that shows a strong reversal from the week’s low at $4.739 before closing the week at $5.562, after testing the week’s high at $5.447 per MMBtu.
Weather Outlook
Cool-weather conditions linger across New England with highs between the 30s-40s, while a fresh cold shot drops into the N. Plains with highs of 20s to 30s. The rest of the US weather is forecast to be mild, with highs between the 50s to 70s, signaling lighter demand. However, the new cold shot arriving into the Midwest will track across the East, with lows of 10s to 30s, signaling a return of strong demand for natural gas.
Much of the US will warm above normal next week, with highs ranging from the 50s to 70s in most areas near the Canadian border. But, upcoming weather forecasts could change the winter outlook for the next 10 to 15 days.
Demand/Supply Equation
EIA reported a draw of -21 Bcf, slightly under market expectations of -22 Bcf but lighter than the 5-year average draw of -44 Bcf. This decreased supplies to 3,623 Bcf and improved deficits to -58 Bcf vs. the 5-year average. Next week’s EIA weekly report favors a more significant than the regular draw due to chilly weather systems across the northern US this past week.
Conclusion
The national demand will swing between moderate and high in the coming weeks. A breakout above $5.688 will signal an uptrend, but don’t expect to see that unless the weather forecast turns bullish. The monthly chart shows a strong reversal in November, keeping the uptrend intact during the upcoming month.
Disclaimer: The author of this analysis does not have any position in Natural Gas futures. Readers are advised to take any position at their own risk, as Natural Gas is one of the most liquid commodities in the world.