Natural Gas Futures Pare Losses Early, Seen ‘Fairly Priced’ in Terms of Fundamentals

Natural gas futures pared their recent losses in early trading Tuesday as March chills, despite moderating in recent forecasts, remained supportive. 

Coming off a 43.7-cent swoon in the previous session, the April Nymex contract was up 5.6 cents to $2.628/MMBtu at around 8:50 a.m. ET.

With technical support from the 20-day moving average at $2.57, and with the temperature outlook into mid-March still supportive for natural gas, Nymex prices could enjoy a “modest recovery,” according to EBW Analytics Group analyst Eli Rubin.

“Although natural gas covered the territory from $2 to $3 — and halfway back again — in under two weeks, it is likely the market will spend several weeks calibrating prices within this wider range,” Rubin said. “While modest short-term upside is possible, Nymex gas futures appear to be fairly priced from a long-term fundamental perspective.”

ICAP Technical Analysis characterized the outlook for natural gas as “neutral” on the heels of Monday’s dramatic sell-off.

“My one concern coming into the week” was that natural gas “was trading fully outside the upper bollinger band on Friday,” ICAP analyst Brian LaRose said. “While the bulls suffered the consequences of that minor overextended condition Monday, the violent retreat did not change anything.

“Looking at the ratio retracements associated with the $2.113 low for support. Need $3.009-3.034-3.069 exceeded to raise the bar.”

Meanwhile, forecasts trended slightly colder overnight, with the American model adding 4 heating degree days (HDD) and the European model picking up 1-2 HDD, according to NatGasWeather.

However, this “means most of the big warmer weekend weather trends held,” the firm noted. “The coming pattern is still relatively cold compared to normal over much of the U.S. the 15 days,” but the latest forecast was “not nearly as impressively cold as the data showed last Friday.”

Temperatures should drive “stronger levels” of natural gas demand nationally next week as much of the country experiences lows from the single digits to 30s, NatGasWeather said.

“However, the intensity of cold backed off over the weekend, and that held in recent data,” the firm said.

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