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James Hyerczyk

Natural gas futures are down sharply for a second session on Friday as trend traders, following the new data from the European weather model that called for weakened cold expectations for the final third of January, drove prices through the psychological $2.00 support level. The price action shows that traders shrugged off the bullish government storage miss from Thursday because it was stale news, while choosing to focus on the future.

 At 20:12 GMT, March natural gas futures are trading $1.985, down $0.061 or -2.98%.

Near-Term Weather Outlook Bearish

The selling was revved up late Thursday after the European weather model dropped more than 15 heating degree days from its forecast for the period running from next Tuesday through January 28, NatGasWeather said in a note to clients.

“The latest European model was quicker with cold exiting during the middle of next week for lost demand, then was milder with the break January 23-27 as colder air pushes out of the United States and back into Canada,” the forecaster said. “Colder air is still favored by the European model to return into the northern United States January 28-30, but the amount of cold air and how far into the United States it pushes has backed off considerably this run.”

The latest storage data Thursday from the Energy Information Administration (EIA) pointed to a tighter supply/demand balance, “but weather patterns haven’t been cooperating, as the past three weeks of warmth” has resulted in withdrawals “being a hefty 300 Bcf lighter than normal,” NatGasWeather said.


U.S. Energy Information Administration Weekly Storage Report

The EIA reported on Thursday that domestic supplies of natural gas fell by 109 billion cubic feet (Bcf) for the week-ended January 10. Analysts were looking for a 92 Bcf withdrawal.

Total stocks now stand at 3.039 trillion cubic feet (Tcf), up 494 Bcf from a year ago, and 149 Bcf above the five-year average, the government said.

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