Natural Gas Fundamental Analysis, March 24, 2017

Natural gas futures are trading slightly lower early Friday after posting a volatile two-sided trade on Thursday in a move that may have reflected the mixed weather forecast. The market initially broke after Thursday’s U.S. Energy Information Administration (EIA) storage report, but then recovered to post a solid gain into the close.

At 0630 GMT, May Natural Gas futures are trading at $3.113, down $0.018 or -0.57%.

On Thursday, the EIA reported that natural gas in storage in the U.S. declined by 150 billion cubic feet in the week-ended March 17. This number was in line with estimates.

In the preceding week, natural gas storage in the U.S fell by 53 Bcf. There was a build of 15 Bcf a year ago and the five-year average shows a drop of 21 Bcf.

As of the report date, total natural gas in storage is 2.092 trillion cubic feet, 16% lower than levels at this time a year ago but 12.7% above the five-year average for this time of year.

According to the weather forecasting models, warm to mild conditions are expected to dominate most the U.S. over the week-end. Next week, investors should look for limited demand for heating or cooling.

The official weather report from natgasweather.com for the period March 23 to March 29 says, “A cold blast lingers over the Great Lakes and eastern U.S. resulting in one more day of strong natural gas demand as overnight lows again drop into the lower 20’s to near 0 degrees Fahrenheit.”

“Over the central and southern U.S. strong high pressure continues to dominate with highs of 60’s to 80’s, locally 90’s.”

“The West will be mostly mild, although with Pacific weather systems still bringing showers.”

“Warm to mild conditions will dominate most of the U.S. this weekend through Wednesday. Late next week, a weather system will impact the Northeast and Ohio Valley with rain and snow.”

“Overall, natural gas demand will be high the next two days, then moderate to low.”

The current weather forecast suggests a bumpy ride for natural gas prices. However, the charts says that a series of potential resistance levels at $3.170, $3.213 and $3.272 are likely to continue to attract hedging activity.

The chart also indicates there is room to the downside with potential targets at $3.092, $3.024 and $2.943.

Any rallies are likely to be labored while the way of least resistance appears to be to the downside.