Natural Gas Price Fundamental Daily Forecast – EIA Estimate is Expected to Come in Below 5-Year Average Draw

Natural gas futures are inching higher on Thursday shortly before the release of the weekly U.S. storage report at 15:30 GMT. The report is expected to show a lighter-than-average weekly withdrawal from Lower 48 storage, according to Jeremiah Shelor at Natural Gas Intelligence (NGI).

At 14:24 GMT, January natural gas futures are trading $3.831, up $0.016 or +0.42%.

Helping to put an early lid on prices is a 3% drop in European gas prices. Underpinning the market following Monday’s gap opening are forecasts calling for more U.S. demand over the next two weeks than previously expected.

Despite expectations for more U.S. short-term demand, many experts expect mild weather over the coming weeks will allow U.S. utilities to leave enough gas in storage to cause stockpiles to reach above normal levels by mid-December. That would be the first time storage would be at above levels since April.

US Energy Information Administration Weekly Storage Report

Ahead of today’s EIA report, Natural Gas Intelligence (NGI) is reporting a Reuters survey showed withdrawal estimates ranging from 36 Bcf to 64 Bcf, with a median pull of 53 Bcf. A Bloomberg survey of seven analysts produced a tighter range of withdrawal projections, with a median draw of 60 Bcf. NGI also modeled a 60 Bcf decrease in inventories for the upcoming report, which covers net changes during the week-ended December 3.

In the year-earlier, EIA recorded a 55 Bcf withdrawal from storage, while the five-year average draw is 78 Bcf.

Short-Term Weather Outlook

According to NatGasWeather for December 9 to December 15, “Cool air lingers across the Great Lakes and Northeast this morning with lows of 10s to 30s, highs of 30s to 50s, although warming in the days ahead into the 50s and 60s as upper high pressure builds in, including highs near 70F New York City by Saturday.

The southern U.S. will be nice to warm with highs of 60s to 80s for very light demand. The Northwest will be the nation’s only cool region this weekend and next week as weather systems bring rain, snow, and highs of 10s to 40s, lows of 0s to 30s.

Overall, national demand will be moderate today into Wednesday, then low-very low after.”

Daily Forecast

Natural gas traders may be trying to build a support base because of technical reasons. The fundamentals remain clearly bearish. However, by mid-to-late next week, colder weather could trigger a short-covering rally. Traders could start pricing in this expected jump in demand after today’s EIA storage report.

Technically, if traders are successful in building a support base, they may try to fill in Monday’s gap. This makes $4.042 a viable upside target over the short-run, followed by $4.283.