Natural Gas Fundamental Forecast – February 28, 2017

Natural gas futures collapsed on Monday, nearly a week after posting a similar move. Prices slide lower as forecasts continued to call for mostly warmer-than-normal weather in key supply areas across the U.S. for the rest of winter, or March 20.

April Natural Gas futures closed the session at $2.693, down $0.094 or -3.37%.

Natural gas prices are now down about 30% this year and even more from its top in December. According to the National Oceanographic and Atmospheric Administration or NOAA, demand for natural gas is nearly 20% below average.

Last week, the U.S. Energy Information Administration reported a withdrawal of 89 billion cubic feet (bcf). That compares with 48 billion a year earlier and the five-year average drop of 132 Bcf.

The EIA report also said that total natural gas in storage currently stands at 2.356 trillion cubic feet. This is 2.5% lower than levels at this time a year ago and 6.6% above the five-year average for this time of year.

Forecast

Although we are likely to see an occasional short-covering rally due to technically oversold conditions, with a significant change in demand, natural gas inventories are likely to stay near record levels.

At this time, it’s all about momentum. If the downside momentum resumes then look for sellers to go after last week’s low at $2.641. This is the trigger point for a possible acceleration into the April 5 bottom at $2.601. We could see an even steep break if this bottom fails because the next target doesn’t come in until $2.310.

Later this week, traders will get the chance to react to the latest weekly storage data report for the week-ending February 24, due on Thursday. It is expected to show a weekly draw of about 5 Bcf.