Natural Gas Price Fundamental Daily Forecast – Colder Overnight Forecast Trends Providing Support Ahead of EIA

Natural gas futures are trading nearly 2% higher on Thursday shortly before the release of the U.S. government’s weekly storage report at 15:30 GMT. The catalysts underpinning prices are forecasts for colder weather and higher heating use over the next two weeks, and as record gas prices in Europe and Asia keep demand for U.S. liquefied natural gas (LNG) exports strong.

At 14:19 GMT, March natural gas futures are trading $3.726, up $0.058 or +1.58%.

The early strength is a bit of a surprise since U.S. gas production is nearing a record and a government report is expected to show mild weather next week. Both events will enable utilities to remove less as from storage than usual for this time of year.

Forecasts Add to Cold Expectations Overnight

Natural Gas Intelligence (NGI) is reporting that colder overnight forecast trends are providing today’s early support.

In terms of the overnight shifts in the forecasting, NatGasWeather highlighted a “hefty” increase in heating demand expectations from the American Global Forecast System on “colder trends across the northern U.S. next week into the following week.”

However, the European model “only partially agreed,” showing a smaller heating demand increase and trending warmer during the “important” December 27-30 time frame, the firm added.

Meanwhile, prices could find support from an imminent “jump” in spot market demand as national heating degree days (HDD) are poised to increase heading into the weekend, according to EBW Analytics Group.

US Energy Information Administration Weekly Storage Report

Ahead of today’s EIA report at 15:30 GMT, analysts were pointing to a withdrawal in the high 80s to low 90s Bcf, with a consensus of 86 Bcf, which would compare with last year’s 118 Bcf draw. The five-year average pull is 114 Bcf.

NGI is reporting that a Bloomberg survey produced a range of withdrawal estimates from 77 Bcf to 91 Bcf, with a median of 85 Bcf. Reuters polled 16 analysts, whose estimates ranged from withdrawals of 63 Bcf to 99 Bcf, with a median withdrawal of 88 Bcf. NGI modeled an 89 Bcf pull for the report, which covers net changes to inventories during the week ended December 10.

Daily Outlook

Today’s EIA report could be considered “old news” with most traders already focusing on the weather during the critical December 27-30 time frame.

Should today’s EIA report provide a bullish miss versus expectations, we could see higher prices into the weekend.

Weather data will need to be closely watched moving forward, as “there will be very cold air over Canada the last 10 days of December, where a slight shift south would bring a spike in forecast demand,” EBW Analytics Group added.

Technically, the direction of the March natural gas market on Friday will be determined by trader reaction to the pivot at $3.722.

A sustained move over $3.722 could send prices into $3.964. A sustained move under this level will target $3.503.