Natural Gas Price Fundamental Daily Forecast – Could Consolidate Until Thursday’s EIA Storage Report

Natural gas futures are trading flat early Wednesday. The price action this week is nearly mirroring last week’s price action. This likely means we’re going to see another tight range as investors await Thursday’s U.S. Energy Information Administration’s weekly storage report.

At 0847 GMT, March Natural Gas futures are trading $2.964, up 0.002 or +0.07%.

In other news, the U.S. could become a net exporter of natural gas in 2018 for the first time since 1957, thanks to increased natural gas exports to Mexico, LNG exports to at least 20 countries and less gas flowing into the country from Canada, according to the U.S. Department of Energy.

Exports of LNG continue to grow, as terminals on the Gulf Coast reach full capacity, and with planned terminal additions in Maryland, Georgia, Texas and Louisiana, the Energy Department expects that by 2019 the U.S. LNG capacity will be the third largest in the world. U.S. pipeline capacity to Mexico is also expected to double by 2019.

As exports of natural gas increased, domestic consumption of natural gas fell in 2017. Higher natural gas prices meant fewer power plants were using the fuel to generate power, and natural gas consumption fell by 6 percent, as compared to 2016.

Forecast

The direction of the market today will be determined by trader reaction to the retracement zone at $2.902 to $2.989.

Look for a bullish tone to develop on a sustained move over $2.886 and for the downside pressure to continue on a sustained move under $2.902.

After last week’s volatility, prices appear to be consolidating as traders continue to monitor the winter weather forecasts to gauge current heating needs.

The latest forecast calls for below freezing temperatures to continue across most parts of the Northeast through January 20, with light snow expected throughout the region. That forecast is only four days out so I have to think it’s been priced into the market.

The forecast that investors are watching goes out to January 28. Currently, models are showing northeast temperatures were expected to return to seasonal levels from January 21 to January 28.

This week’s storage report is expected to show a draw of about 197 billion cubic feet (bcf) in the week-ended January 12.

That compares with last week’s 359 bcf draw, a fall of 243 bcf a year earlier and a five-year average drop of 203 bcf.

Total natural gas in storage currently stands at 2.767 trillion cubic feet (tcf), according to the U.S. Energy Information Administration. That figure is 415 bcf, or around 13.0%, lower than levels at this time a year ago and 382 bcf, or roughly 12.1%, below the five-year average for this time of year.