Nat Gas Plunges Despite Calls for Massive EIA Withdrawal

Natural gas futures are down sharply on Thursday, shortly before the release of the weekly government storage report. Prices are falling despite expectations of strong storage withdrawals, potential supply disruptions and robust export demand, which suggests something may be amiss with the short-term weather forecasts.

At 14:08 GMT, March natural gas futures are trading $4.899, down $0.602 or -10.94%.

Output Hurt by Icy Weather

Icy weather in the central United States caused natural gas output to drop on Thursday to the lowest in a year in many producing basins, and prices to jump in Texas, Louisiana and Chicago to their highest since last year’s February Freeze, Reuters reported.

The output drop reminded the energy market of last February’s Winter Storm Uri, which killed over 200 people in Texas, caused power and gas prices to spike to record highs in many parts of the country and left 4.5 million Texas homes and businesses without heat and power – in many cases for days.

Data provider Refinitiv said average U.S. output fell from a monthly record of 97.3 billion cubic feet per day (bcfd) in December to 92.9 bcfd in January and 91.3 bcfd so far in February.

US Energy Information Administration Weekly Storage Report

According to Natural Gas Intelligence (NGI), “government inventory reports have shown a steepening drawdown in recent week as a result of frigid weather through most of January.”

NGI also said, “The Energy information Administration (EIA), set to release its next report at 15:30 GMT Thursday, has reported at least a 200 Bcf withdrawal in each of the last three weeks. Another 200 Bcf-plus pull is expected for Thursday.

A Bloomberg survey of eight analysts produced a range of estimates from 263 Bcf to 292 Bcf, with a median of 280 Bcf. A Wall Street Journal survey had the same range of projections and landed at an average decline of 267 Bcf. A Reuters poll was wider with a low estimate of 232 Bcf, a high of 297 Bcf and a median of 277 Bcf. NGI modeled a 286 Bcf pull.

This would easily crush the 183 Bcf withdrawal recorded by the EIA in the same week last year and the five-year average of 150 Bcf.”

Daily Forecast

The main trend is up according to the daily swing chart. A trade through $5.572 will signal a resumption of the uptrend. A move through $3.629 will change the main trend to down.

The minor trend is also up. A trade through $4.620 will change the minor trend to down. This will shift momentum to the downside.

The market is currently trading side a key retracement zone at $4.774 to $5.094. This zone is controlling the near-term direction.

The minor range is $3.629 to $5.472. Its 50% level at $4.601 is the first potential downside target. This is followed by the major retracement zone at $4.378 to $3.964.

Look for a weaker tone on a sustained move under $4.774, but be prepared for buyers to come in at $4.601 and $4.378 to $3.964.

Recovering $5.094 will indicate the return of buyers. This could lead to a retest of $5.572. Overtaking this level could trigger an acceleration into $6.132.

Watch for heightened volatility following the release of the midday weather forecasts.