Natural Gas Price Fundamental Daily Forecast – Expect Volatility Until Early March Weather Pattern is Detemined

Natural gas futures rose on Tuesday as investors priced in the possibility of colder weather returning to key demand areas during the first week in March.

April Natural Gas futures settled at $2.649, up $0.051 or +1.96%.

After hitting its lowest level in nearly two years last week, natural gas rose to its highest level since February 9 early Tuesday.

Currently, NatGasWeather.com is saying for the February 21 to 25 period. “High pressure will strengthen over the southern and eastern U.S. this week with very warm February temperatures that will reach the 60s and 80s. The western and central U.S. will see weather systems with cold and snow. Modest cooling will at times also push into the Midwest/Western Great Lakes. This coming weekend, the warm ridge will continue to dominate the South and East, while still cold and unsettled over the West into the central U.S. Demand over the next week will be moderate to low.”

Forecast

A change in the weather forecast calls for colder weather to trend over the Eastern U.S. for the first week of March. This should lead to increased demand.

Last week, the U.S. Energy Information Administration (EIA) announced an estimated 194 Bcf draw from storage for the week-ended February 9, above the 183 Bcf draw expected by a consensus of analysts, and well above the 154 Bcf withdrawal average over the past five years.

The withdrawal brought the national stock deficit to the five-year average to an estimated 18.7%, according to the EIA data.

Looking ahead to this week’s EIA report, the market is expecting a 110 Bcf draw for the week-ending February 16. This will be slightly better than the -92 Bcf from last year and the -145 Bcf five-year average.

Looking at the daily chart, a sustained move over $2.661 will indicate the return of buyers. The buying could be short-covering and a little speculating. If the rally does gain traction, we could see a move into a key 50% level at $2.774. A test of this level is likely to be met with strong hedge fund selling.

A failure to drive prices well-above $2.661 will indicate that the market is still in the hands of strong short-sellers. This could lead to a retest of $2.565 and perhaps $2.487 over the near-term.