Natural gas futures plunged on Wednesday with the market retracing more than half of its rally from January 5 to January 30 in just one day. Traders said a change in the weather forecast to mild temperatures triggered the sell-off.
March Natural Gas futures settled at $2.995, down $0.200 or -6.26%.
Traders started to sell futures contracts aggressively due to a change in the six- to 10-day and eight- to 14-day forecasts. Higher than previously forecast temperatures are now expected to dampen demand for the heating fuel.
At 0807 GMT, March Natural Gas futures are trading $2.935, down $0.061 or -2.07%.
Technical factors could play a role in today’s price action with the market currently testing a key 50% to 61.8% retracement zone.Natural Gas Price Fundamental Daily Forecast – Trend Still Up Despite Weather-Related Selling PressureThe short-term range is $2.693 to $3.259. Its retracement zone is $2.976 to $2.909. The market is currently trading inside this zone.
The main range is $2.532 to $3.259. Its retracement zone is $2.896 to $2.810.
Combining the two retracement zones identifies $2.909 to $2.896 as the major area that has to hold in order to keep this potentially bullish chart pattern intact.
This week’s U.S. Energy Information Administration’s storage report is expected to show a draw of about 100 billion cubic feet (bcf) in the week-ended January 26.
That compares with a decline of 288 bcf in the preceding week, a fall of 87 bcf a year earlier and a five-year average drop of 160 bcf.
According to the EIA, total natural gas in storage currently stands at 2.296 trillion cubic feet (tcf). That figure is 519 bcf, or around 18.4%, lower than levels at this time a year ago and 486 bcf, or roughly 17.5%, below the five-year average for this time of year.
If the storage report is bearish then look for another acceleration to the downside on a sustained move under $2.896.
If the storage report is bullish then buyers should step in because the market is currently trading inside a value zone.