Natural Gas Fundamental Analysis, March 23, 2017

Natural gas futures are trading stable on low volume and volatility ahead of Thursday’s U.S. opening and weekly inventories report from the U.S. Energy Information Administration’s weekly storage report, due to be released at 1430 GMT.

On Wednesday, the market plunged from its multi-week high at $3.167, set the day before, closing the session at $3.073, down $0.082 or -2.60%.

Prices declined for the first time since late last week as investors continued to react to short-term weather forecasts. According to sources, investors are pricing in the news that warm to mild conditions are expected to dominate most of the U.S. this weekend. In the central U.S., for example, spring-like conditions are expected to return, bringing along with it, heavy rains and thunderstorms.

Additionally, natgasweather.com is predicting that temperatures next week will be mostly mild to warm across the U.S., putting a lid on demand for heating or cooling.

On Thursday, the EIA’s weekly storage report is expected to show a draw of 147 billion cubic feet in the week-ended March 17. Last week’s report showed a 53 Bcf draw. The new numbers reflect the increased demand from last week’s major snow storms that hit the East Coast.

Last year for this week, the report showed at build of 15 Bcf. The government report is also expected to show the five-year average for this time of year is for a drop of 21 Bcf.

According to the EIA, total natural gas in storage currently stands at 2.295 trillion cubic feet. This is 7.7% lower than levels at this time a year ago, but 15.8% above the five-year average for this time of year.

We expect to see hedging pressure come in at multiple levels at $3.092, $3.122, $3.170 and $3.213, helping to decrease the odds of a breakout to the upside.

On the downside, the primary target today is $3.024. Taking out this level may trigger another steep break into $2.943.