Nat Gas Supported by Overnight Cold; EIA Fails to Impress

Natural gas futures are trading higher shortly after the release of the government’s storage report. Underpinning the market from the opening are forecasts that leaned toward colder overnight. Capping gains, however, is the March 15-22 outlook that indicates a warming trend.

At 15:35 GMT, May natural gas futures are at $4.633, up $0.072 or +1.58%. At the same time, the United States Natural Gas Fund ETF (UNG) is trading $16.26, up $0.36 or +2.26%.

US Energy Information Administration Weekly Storage Report

On Thursday, the U.S. Energy Information Administration (EIA) reported a bigger-than-expect draw of 124 Billion Cubic Feet (Bcf).

According to Natural Gas Intelligence (NGI), ahead of the report estimates were pointing to a triple-digit withdrawal for the latest EIA storage report for the week-ending March 4.

Estimates submitted to Bloomberg showed a median prediction for a 118 Bcf decrease for last week. Withdrawal predictions ranged from 108 Bcf to 141 Bcf. A Reuters’ poll found estimates ranging from withdrawals of 91 Bcf to 128 Bcf, with a median estimate of 120 Bcf.

The five-year average for the period is a pull of 89 Bcf, while the year-earlier period saw a 50 Bcf decrease, EIA data showed.

Total supplies in storage now stand at 1.519 trillion cubic feet (Tcf), down 281 Bcf from a year ago and 290 Bcf below the five-year average, the government said.

Short-Term Weather Outlook

Overnight, the American and European models both shifted colder, according to NatGasWeather. This came as “no surprise” given the warming in the forecast that preceded the overnight runs, the firm said.

Overnight cold trends added 2-4 heating degree days (HDD) to the outlook, a “minor” amount “compared to the more than 30 HDD shed since late last week on big warmer trends” between early next week and March 23, NatGasWeather said.

The pattern during this time frame “will result in the lightest national demand since last fall” as comfortable temperatures spread across much of the Lower 48, NatGasWeather said. “What makes the pattern emphatically bearish is recent weather data suggests bearish weather headwinds will continue into the last week of March.”

Daily Forecast

The big draw in the EIA storage report fell within the range of guesses so there was very little reaction to the news.

Next week’s report is expected to be bearish, but prices could remain underpinned because of worries over a supply disruption in Europe if Russia decides to shut-down access to its natural gas.

Technically, the major downside target zone is $4.305 to $4.095. Buyers could come in on a test of this area because it represents value.