Natural Gas Price Fundamental Daily Forecast – EIA Report to Show Much Larger-than-Normal Withdrawal

Natural gas futures are trading higher on Thursday, putting the market in a position to challenge this week’s high at $2.849. The price action suggests traders are anticipating a bullish storage report later in the session, given that the latest weather models are showing mixed data. The U.S. Energy Information Administration storage report, due to be released at 15:30 GMT, is expected to show a draw of 172 Bcf.

At 12:18 GMT, April natural gas is trading $2.827, up $0.028 or +1.00%.

Lower spot markets were responsible for most of the selling pressure on Wednesday. However, prices could turn around if buyers begin to price in the return of the cold blast.

Short-Term Weather Outlook

“Further pressure was created by overnight weather data that offered mixed signals. The Global Forecast System (GFS) added 15 heating degree days (HDD) to the outlook while the European model trended warmer to drop 7-8 HDDs compared to Monday’s data,” according to NatGasWeather.

“The overall timeline of major weather features to impact the U.S. remains intact, with frigid cold blasts arriving this weekend through next week, but still with a warm ridge favored across the southern and eastern U.S. March 10-13 and where the data is neutral to slightly bearish,” the forecaster said.

“The latest afternoon European model trended colder by 12-13 HDDs versus Tuesday night’s run, especially for late this weekend into early next week and again March 10-12, where warming was favored to be a little slower arriving across the eastern United States,” NatGasWeather said.

EIA Storage Report Forecast

This week’s EIA report is expected to show a much larger-than-normal withdrawal for the week-ended February 22. A Reuters poll of 19 market analysts showed a withdrawal range of 160 Bcf to 179 Bcf, and a median of 171 Bcf.

This reports compares with a year ago withdrawal of 85 Bcf and a five-year average decrease of 104 Bcf for the period. If the report hits the forecast then this would cut current stockpiles to 1.534 Tcf, the lowest level for that week since 2014, according to the EIA.

Bloomberg is looking for a withdrawal range of 165 Bcf to 180 Bcf, with a median draw of 173 Bcf. Natural Gas Intelligence has estimated a withdrawal of 167 Bcf.

Daily Forecast

We’re looking at strength ahead of the EIA report, which could be an indication that investors are betting on a larger-than-estimated draw. This could trigger a short-covering spike to the upside. The early rally could also be indicating a bullish change in the weather pattern overnight.

However, gains may still be limited because “marketers holding gas in storage are likely to be quick to liquidate their holdings, keeping cash prices in check,” EBW CEO Andy Weissman said. Furthermore, despite one of the coldest starts to March ever, storage appears to be high enough to absorb any shocks. Basically, this late in the heating season, there is limited risk of a storage squeeze.

The key resistance area remains $2.812 to $2.871. The market could strengthen over $2.871 with $2.932 the next target. A pullback under 2.812 will signal the return of sellers. The weakness could extend if $2.792 also fails as support.