Nat Gas Down as Weather Woes Outweigh Ukraine Uncertainties

U.S. natural gas futures are edging higher on Monday, but trading inside Friday’s range, suggesting investor indecision and impending volatility. The price action is being fueled by traders weighing uncertainties surrounding Russia’s invasion of Ukraine against a bearish domestic fundamental backdrop.

At 14:06 GMT, April natural gas futures are trading $4.497, up $0.027 or +0.60%.

Looking for Guidance and Catalyst

Natural gas is searching for guidance and a catalyst at the start of the new trading week as traders weigh dismal fundamentals against the anxieties over the military conflict in Ukraine, according to EBW Analytics Group senior analyst Eli Rubin.

“The April contract is seeking direction after volatile trading into March expiration and a whirlwind of reactions following Russia’s invasion buffeted natural gas last week,” Rubin said in a note to clients early Monday.

Hope is fading for a late winter cold front that will drive heating demand. At the same time, production is recovering from early February freeze-offs. Both factors are helping to put a lid on prices.

“Trader attitude, however, remains buoyed by a climate of energy scarcity and Russia’s invasion of Ukraine,” Rubin said. “First-of-month pipeline nomination patterns may also (erroneously) suggest a phantom production drop tomorrow and Wednesday.”

Short-Term Weather Outlook

According to NatGasWeather for February 28 to March 5, “Demand will be decent Monday across the Great Lakes and Northeast as chilly air lingers in the wake of weekend weather systems with lows of 0s to 30s, highs 10s to 40s.

However, the rest of the U.S. will be mild to warm with highs of 50s to 80s, which will expand to cover most of the U.S. Tuesday – Wednesday besides the wetter Northwest for very light demand.

A brief bump in demand is expected Thursday – Friday as a weather system races across the Great Lakes and Northeast, although followed by another warm break over most of the U.S. next weekend for a return to light national demand.”

Daily Forecast

We’re looking for a potentially volatile week as the Russian invasion of Ukraine continues, but we’re being a little fooled by Monday’s early price action. It suggests investors are primarily focusing on the weekend weather trends which are showing a not so cold weather pattern for March 7-11 by both the GFS and EC models.

Meanwhile, an early look at Thursday’s government storage report suggests a number that leans to the bearish side of the five-year average.