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James Hyerczyk
Natural Gas

Natural gas futures are trading slightly better early Thursday, hovering near the mid-point of its two-week range. We could be looking at position-squaring ahead of the release of the government’s weekly storage report. Bearish weather developments on Wednesday are also keeping a lid on prices with the U.S. model flipping to the same side as the European model in calling for milder temperatures later in the month.

At 07:16 GMT, April natural gas futures are trading $2.632, up $0.011 or +0.42%.

Short-term Weather Forecast

According to NatGasWeather for February 13 to 19, “A fast moving weather system will bring rain, snow and ice across the East today, followed by a milder break late in the week. The West will be cool to cold and unsettled. The southern U.S. will be mild to warm with highs of 60s to 80s, although cooling Fri-Sat. This weekend and next weekend will be quite chilly as cold air sweeps across much of the country with lows of -10s to 20s North and 20s to 40s over the South. Overall, national demand will be moderate through Thursday, then high Friday through next week.”

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Mid-Term Weather Forecast

At mid-week, prices were holding steady with the Global Forecast System (GFS) calling for colder temperatures, and the European Model indicating a slightly milder trend for February 22-26. This changed on Wednesday when the GFS model confirmed the milder trend, wiping out any incentive to stay long.

“The data still advertises several strong cold shots sweeping across the country starting this weekend and through much of next week for strong national demand, just not as frigid compared to earlier in the week,” NatGasWeather said.

Weekly Storage Report Guidance

Heading into this week’s U.S. Energy Information Administration’s weekly storage report, the market remains concerned about oversupply.

The consensus market estimate calls for a withdrawal in the 80 Bcf range for the week-ending February 8.

Bloomberg predicts a draw in the range of 77-106 Bcf, with a median draw of 82 Bcf. Reuters is also looking for a draw range of 77-106 Bcf, with a median draw of 84 Bcf. The Wall Street Journal is predicting an average withdrawal of 85 Bcf. Kyle Cooper of IAF Advisors projects an 88 Bcf pull. EBW Analytics is looking for a draw of 83 Bcf and Natural Gas Intelligence analysts call for a 73 Bcf withdrawal.

Daily Forecast

We could see some volatility in the form of a two-sided trade after the release of the EIA numbers. The weather report is bearish, however, this assessment could change quickly if both the GFS and European models suddenly shift to the colder side of the trend.

Technically, the trend is down, but traders may be trying to form a support base. The downtrend will resume on a sustained move under $2.565. Look for short-covering to strengthen on a trade through $2.648 and a change in trend on a move through $2.730.

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