Natural gas futures are edging higher for a fourth session on Wednesday, putting the market in a position to take out the two-week high and change the short-term trend to up.
Once again, the catalysts underpinning the market and driving out the weak short-sellers are stronger spot market prices amid forecasts pointing to chilly temperatures in store for the Great Lakes and Northeast late in the month.
At 12:50 GMT, December Natural Gas is trading $2.548, up $0.016 or +0.63%.
On Tuesday, the Global Forecast System (GFS) showed a “much colder pattern” compared to its European counterpart, and the midday GFS run trended even colder for late October, according to NatGasWeather.
“There remain three major periods of interest, starting with a cold shot currently sweeping across the northern U.S. for a bump in national demand,” the forecaster said. “This will be followed by national demand dropping below normal this weekend through early next week…but where the data is cold enough and bullish in most weather models is October 24-30 as a series of stronger cold shots advance deep into the U.S. with widespread lows of teens to 30s.”
Short-Term Weather Outlook
According to NatGasWeather for October 16-22, “A weather system with showers and cooling will sweep across the Midwest and Northeast the next few days with lows of 30s to 40s. Texas and the southern US will be mostly comfortable with highs of upper 60s to lower 80s, although locally hotter over the Southwest, South Texas, & Florida. High pressure and above normal temperatures will gain across the eastern half of the country this weekend with near perfect highs of 60s to 80s, while slightly cool over much of the West. Overall, decent demand the next few days, then lighter this weekend.”
The trend will change to up on a trade through $2.568, making this today’s upside target. Should a move through this level generate enough upside momentum, then with help from the “chilly” forecast, we could see an eventual surge into a 50% retracement level target at $2.636.
A failure to reach or blow through $2.568 will indicate traders are becoming concerned over Thursday’s government storage report that could show another triple digit build. However, since this is stale data and traders are more focused on the future weather, any correction is likely to be short-lived.