Natural Gas Price Fundamental Daily Forecast – EIA Report Expected to Show 160 Billion Drawdown

Natural gas futures were hit with renewed selling pressure on Wednesday ahead of Thursday’s government storage report and as investors continue to assess the short-term weather forecasts, with the bulls hoping for any signs of increased demand.

On Wednesday, February natural gas futures settled at $2.636, down $0.061 or -2.26%.

The latest weather forecast from NatGasWeather.com for the December 21 to December 25 time period says, “High pressure will dominate much of the country through Thursday with above normal temperatures and light demand. A quick cool shot will sweep across the Northeast Thursday, then warming above normal after. Frigid air will pour across the western and central U.S. late in the week into next week with very cold temperatures and strong demand as lows reach minus 15F to 20F. Cold air will also push deep into the South, including Texas, with lows of teens to 30s.

Overall, national demand will be moderate to low though Friday, then high.”

Forecast

Given the weather forecast and the price action, it doesn’t look like investors feel the upcoming cold snap will last long enough to trigger enough demand to dramatically affect storage. Like I’ve said several times in the past, you have to watch the language in the weather reports. Words like cold, cold snap or cold blast are likely to lead to fast, short-lasting short-covering rallies. What this market needs to generate higher prices over the near-term is a cold pressure dome or a lingering cold system. Otherwise, there is nothing to shake the weaker shorts out of the market.

Fundamentally, the U.S. Energy Information storage report is expected to show a draw of 160 billion. Last week, the draw was 69 billion.

The chart indicates that taking out last week’s low at $2.602 will extend the weakness with the psychological $2.500 level the next likely target.

Taking out this week’s high at $2.789 could trigger a short-covering rally with $2.906 the next likely target.