Natural gas prices surged early in the session on Tuesday, however, there wasn’t enough buying to sustain the move and the market finished lower for the session. The week-end cold blast helped fuel the early short-covering rally, but a new 10-day forecast drove prices lower.
February Natural Gas settled at $2.654, down $0.004 or -0.15%.
According to NatGasWeather.com, “Several frigid Arctic blasts will sweep across the northern and eastern U.S. over the coming week for very strong demand. The weather data trended colder over the week-end with these systems, while also having cold temperatures last a day or two longer than what the market might have expected late last week. However, the weather data favors a milder ridge returning to the East around January 7th. It seems the markets gained on colder trends through January 6, but then sold off this morning as the markets weighed the milder days January 7 to 10 that was confirmed in the overnight data.”
Later this week, the U.S. Energy Information Administration is expected to report 3,336 bcf of working gas in storage for the week-ending December 22.
The EIA report is also expected to report a draw of 108 bcf, which is 125 bcf smaller than a year ago and 3 bcf smaller versus the five year average.
Forecast
The price action was pretty clear on Tuesday. Up on cold weather, down on mild weather. Once again, periodic cold blasts will trigger periodic short-covering rallies. But until there is a prolonged cold weather dome in place, the rallies are likely to be short-lived.
The daily chart indicates the trend will change to up on a sustained move over $2.789. If this generates enough upside momentum, we could see a rally into $2.886 to $2.962.
Taking out $2.562 will signal a resumption of the downtrend.
This article was originally posted on FX Empire