Nat Gas Bulls Waiting for Confirmation of Early Feb Cold
Natural gas futures are inching lower early Wednesday despite reports calling for colder near-term weather patterns, liquefied natural gas (LNG) export strength and expectations for increased storage draws against the potential for warmer weather in February.
Meanwhile, Natural Gas Intelligence (NGI) reported that spot gas prices pulled back sharply in the volatile Northeast amid a spate of moderate weather to start the week.
At 09:52 GMT, March natural gas futures are trading $4.205, down $0.023 or -0.57%.
NatGasWeather’s Short-Term Outlook
According to NatGasWeather, models showed mild conditions would push across the country through Wednesday. However, heating demand “is still on track to spike late this week as an Arctic blast sweeps across the Midwest and East with areas of snow” and subzero temperatures.
This is to be “aided by lows of 20s and 30s into portions of the southern United States. A reinforcing Arctic shot is expected January 24-27 to keep strong national demand going” and when “the pattern remains plenty cold enough to impress.”
Output Remains Below December Levels
NGI wrote that output was estimated at around 94 Bcf on Tuesday, about 2 Bcf/d below December levels, and the coming winter chill in the South could force further production interruptions – after an early January bout of brutal cold forced production curtailments.
Early Peek at Thursday’s EIA Weekly Storage Report
Thursday’s U.S. Energy Information Administration (EIA) weekly storage report is expected to reveal the steepest pull of the winter season to date.
NGI estimated a withdrawal of 195 Bcf for the week ended January 14. That would compare with an actual pull of 179 Bcf a year earlier and a five-year average of 167 Bcf.
Last week, the EIA reported a pull of 179 Bcf natural gas from underground inventories for the week-ended January 7. The draw decreased inventories to 3,016 Bcf, leaving stocks below the year-earlier level of 3,215 Bcf but above the five-year average of 2,944 Bcf.
It “appears that this January will wind up the coldest January since 2014,” Bespoke Weather Services said. “The main question now is whether or not the colder pattern hangs on into February,” the firm added.
The sideways price action on the chart suggests traders still aren’t sure about the 11-15 day forecast. Once they get confirmation either way, March natural gas futures traders will make their next move.
The market is currently trading inside a long-term retracement zone at $4.378 to $3.964.
Look for a downside bias on a sustained move under $3.964. The 50% level at $4.378 is a potential trigger point for an acceleration to the upside.
Holding between $3.964 and $4.378 will indicate investor indecision and impending volatility.