Natural Gas News: Nat Gas Drops 3% Despite Bullish Storage Draw on Weather Outlook

Natural Gas Retreats Despite Larger-Than-Expected Storage Draw

Natural gas futures are trading lower despite a larger-than-expected drawdown in this week’s U.S. Energy Information Administration (EIA) weekly storage report. The report showed a draw of 119 Bcf, higher than the 109 Bcf forecast.

At 17:11 GMT, February Natural Gas Futures are trading $3.417, down $0.108 or -3.06%.

Market Focuses on Weather Outlook Over Storage Data

The market opened higher and actually rallied to $3.634 before retreating ahead of the report. The price action suggests investors are keying in on the weather, since that represents the future while the storage report is based on stale data.

The EIA reported a withdrawal for the week ended January 2 that left working gas in storage at 3,256 Bcf. That put inventories about 1% above the five-year average.

Near-Term Demand Light, but Colder Weather Approaches Mid-Month

NatGasWeather says that demand is expected to be very light into Monday. Meanwhile, the longer-term weather forecasts turned colder, potentially boosting heating demand. The Weather Group said Wednesday that a colder weather forecast is predicted for the Midwest and East Coast for January 17-21.

Production and LNG Flows Weigh on Prices

Higher production also weighed on prices with the latest U.S. dry gas production at 112.6 Bcf/day, up 10.9 Bcf/day year over year. Estimated LNG net flows to US LNG export terminals on Wednesday were 18.4 Bcf/day, down 7.7% week over week.

Technical Outlook: Downtrend Remains Intact

Technically, the main trend is down according to the daily swing chart. The short-term range is $4.176 to $3.324. Its mid-point at $3.750 is the next potential upside target and resistance. A trade through $3.324 will signal a resumption of the downtrend with $3.248 the next target.

The main trend will change to up on a trade through $4.176, but the market is likely to run into headwinds anyway with the 50-day moving average at $4.090, the long-term 50% level at $4.173 and the 200-day moving average at $4.307.

Bearish Positioning into the Close

Looking ahead to the close, the minor range is $3.324 to $3.634. The market is currently trading on the weak side of its pivot at $3.479, putting it in a bearish position into the close. Reaction to the minor pivot will set the tone into the close today.

The cold is coming according to the 10-15 day forecast, but it appears to be a normal cold front and not the lingering arctic dome this market will need to get it out of the hole with any conviction.

More Information in our Economic Calendar.