Nat Gas Traders Looking for Larger-Than-Usual EIA Draw

Natural gas futures are trading flat early Thursday after surging the previous session on worries over late-March cold and steady-demand from Europe. Traders are also positioning themselves ahead of today’s weekly government storage report that show the last drawdown of the season.

At 02:22 GMT, May natural gas futures are trading $4.784, unchanged.

Short-Term Weather Outlook

NatGasWeather models continued to show pleasant conditions and modest heating demand for the second half of March. However, the firm’s forecasts are now showing somewhat chillier air developing near the end of the month.

The weather pattern over the next 12 days remained “exceptionally warm and bearish” in the latest model runs, with conditions expected to result in “much lighter than normal national demand,” the firm said. Still, the data “suggested slightly colder weather systems will sweep across the northern U.S. March 27-30 for near seasonal national demand.”

Lower Production, Strong LNG Demand Underpinning Prices

Natural Gas Intelligence (NGI) reported that domestic production held near 93 Bcf – as it has for several days. Output has hovered well below early March levels of around 95 Bcf, according to Bloomberg estimates, alleviating downward pressure from the supply side.

U.S. exports of liquefied natural gas (LNG) topped 13 Bcf on Wednesday, NGI data showed, reflecting robust demand from Europe, even as weather warms on the continent. American LNG feed gas flows have held near record levels throughout the three-week Russian invasion of Ukraine.

US Energy Information Administration Weekly Storage Report

On Thursday at 14:30 GMT, the EIA will release its weekly storage report for the week-ending March 11.

Traders are looking for a larger-than-usual withdrawal for this time of year due to the blast of winter storms last week that temporarily drove demand higher. LNG demand also remained strong throughout the report week.

NGI is reporting that estimates submitted to Bloomberg showed a median prediction for a 73 Bcf decrease for last week. Withdrawal predictions ranged from 68 Bcf to 87 Bcf. Reuters’ poll spanned forecasts for withdrawals of 53 Bcf to 87 Bcf, with a median estimate of 73 Bcf. The Wall Street’s Journal’s survey landed an average pull of 74 Bcf. Estimates ranged from decreases of 69 Bcf to 87 Bcf.

The forecasts compare with a 16 Bcf pull in the comparable week of 2021 and a five-year average draw of 65 Bcf.

Short-Term Outlook

We’re not looking for much of a reaction to the EIA report with many traders believing that this week’s print could mark the final withdrawal of the season. It’s going to be hard to rally on supply concerns if the U.S. starts the process of building inventories.

Technically, the trend is up on the daily chart, but bullish traders are facing a wall of resistance from $4.780 to $4.928.

Meanwhile, all it is going to take is a move through $4.488 to change the main trend to down.