Natural Gas Price Fundamental Daily Forecast – Bulls Hoping for Cold Forecast, Larger Storage Draw

Natural gas futures are steady but rangebound on Thursday as traders assess the latest forecasts while awaiting the release of the government’s weekly storage report at 15:30 GMT and the midday weather outlook shortly thereafter.

Helping to underpin prices is the strength in the cash market and expectations for ongoing blasts of frigid air over swaths of the Lower 48. Strong liquefied natural gas (LNG) demand from Europe is also helping to support the market.

At 14:03 GMT, March natural gas is trading $3.707, down $.003 or -0.11%.

Putting a lid on the market, however, are concerns that the cold blast is too little, too late to fuel the start of an uptrend. And a potentially bearish government storage report.

Short-Term Weather Forecast

According to Natural Gas Intelligence (NGI), the weather models each day are showing varying degrees of cold through most of January. More importantly, the bottom line remains firm:  Frosty winter weather and robust heating demand are in store this month.

NatGasWeather said the futures market embraced that reality Wednesday.

“The weather models have been bouncing between colder and warmer trends all week,” the firm’s forecasters said. However, they added, subzero temperatures in the Northern Plains and Upper Midwest early Wednesday were expected to advance down the Plains and the East by Friday, generating “strong national demand.”

After a brief break this coming weekend, “another frigid cold shot will sweep across the Midwest and Northeast early next week” with more freezing overnight temperatures, according to NatGasWeather.

Energy Information Administration Weekly Storage Report

This week’s EIA report is expected to show a 55 Bcf withdrawal for the week-ending December 31. In the year-earlier period, the government recorded a 127 Bcf pull, while the five-year average is a draw of 108 Bcf.

According to NGI, a Reuters’ poll of analysts, whose estimates ranged from withdrawals of 83 Bcf to 31 Bcf, landed at a median expectation of 50 Bcf. A Bloomberg survey generated a similar range and median withdrawal estimate of 55 Bcf. NGI is modeling a 50 Bcf withdrawal.

Daily Forecast

The price action suggests bullish investors are waiting for news that could trigger an acceleration to the upside.

That news will probably be a cold midday forecast combined with a larger-than-expected drawdown in weekly storage.

Technically, the March futures contract would have to clear $3.964 to show the first sign of strength. Overcoming $4.378 is likely the trigger point for an acceleration to the upside.

On the downside, a failure to hold $3.416 could lead to a quick test of the June 21 bottom at $3.186.