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James Hyerczyk
Offshore oil production installation

Natural gas is trading lower shortly before the regular session opening and the release of the latest government storage report. The market is also within striking distance of its recently reached multi-year low at $1.862. Sellers continue to control the trade with the forecasts offering little to inspire the bulls.

At 12:10 GMT, March natural gas is trading $1.845, down $0.020 or -1.07%.

Short-Term Weather Forecast

According to NatGasWeather for January 29 to February 4, “Several weather systems will impact the US this week, although none cold enough to impress. One mild system will track across the Southeast the next few days, while cooler ones impact portions of the West. Additional mild to cool systems will track across the country this weekend and early next week. Overall, highs will be in the 30s to 50s across the northern US, locally 20s, with 50s to 70s across the southern US. With frigid air remaining in Canada the next 7-days, national demand will be lighter than normal.”

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Mid-Term Weather Forecast

Natural Gas Intelligence wrote, as for the latest weather picture Wednesday, the midday Global Forecast System (GFS) data added heating degree days (HDD) to the outlook starting around the second week of February, according to NatGasWeather. The colder midday trends followed a warmer overnight shift going into Wednesday’s trading.

“The biggest milder trends the past few days occurred February 5-8, as only a glancing shot of cold air is expected into the Midwest and Northeast” instead of cold that would push “more aggressively across the Canadian border,” the forecaster said.”…The GFS still remains much milder for February 5-8 compared to what it had shown to open the week, but the February 9-13 pattern continues to show a more impressive push of subfreezing air into the northern U.S.”

However, “over the past several months, in most instances, when the pattern looked quite cold at days 12-15, the weather trended notably milder as these days rolled into the day five to 11 period, which could occur again here.”

U.S. Energy Information Administration Weekly Storage Report

Today’s EIA Weekly Storage report, due to be released at 15:30 GMT, is expected to show a draw of about 197 Bcf.

Last year the EIA recorded a 171 Bcf withdrawal for the similar week, while the five-year average is a pull of 143 Bcf.

Last week, the EIA reported a net 92 Bcf withdrawal for the week-ended January 17, which left stocks at 2,947 Bcf, 23.2% above year-ago levels and 9.3% higher than the five-year average.

Bloomberg analysts are predicting a 197 Bcf withdrawal. A Wall Street Journal surveyed forecasts a 195 Bcf withdrawal. Reuters analysts are looking for a 195 Bcf pull. Finally, Natural Gas Intelligence experts are calling for a withdrawal of 210 Bcf.

Daily Forecast

A bearish EIA report could drive the natural gas market through the recent multi-year low at $1.862. The long-term bottom at $1.650 is still a potential near-term target.

If the bottom at $1.862 continues to hold then look for prices to strengthen over $1.910. A trade through $1.957 will change the minor trend to up.

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