Natural Gas Price Fundamental Daily Forecast – Huge Storage Withdrawal of 200 Bcf Expected in EIA Report

Natural gas futures are trading higher early Thursday following yesterday’s solid gains. The move is being fueled by short-covering ahead of today’s weekly inventories report from the U.S. Energy Information Administration (EIA).

The rally actually began on Tuesday with the formation of a potentially bullish technical chart pattern amid rising expectations of a massive late session withdrawal from storage in this week’s EIA report. However, gains are likely to be limited despite the report and the return of cold weather, due to mixed cash market activity.

At 10:45 GMT, May natural gas is trading $2.840, up $0.006 or +0.21%.

Short-Term Weather Outlook

According to NatGasWeather for March 14 to March 20, “Temperatures will be warm across the South Great Lakes and East the next couple days with highs of 50s to 70F for Chicago today and New York City on Friday. The southern US and Mid-Atlantic Coast will be spring-like with highs of 60s to 80s for very light demand. A strong storm continues across the Midwest/central US with rain and snow, but with only modest cooling. The West remains unsettled but warming. Colder weather systems will arrive East of the Rockies this weekend through next week with lows of 10s to 30s for strong demand. Overall, national demand will ease to moderate-low late this week, then back to high late this weekend.”

Mid-Term Weather Outlook

NatGasWeather also said, “The data continues to advertise cold returning over all regions east of the Plains this weekend through next week, followed by mild to warm conditions dominating most of the country March 23-27, and it’s increasingly likely warmth will persist through the end of the month.”

EIA Report Estimates

Consensus estimates for today’s report covering the week-ending March 8 have the EIA reporting a withdrawal greater than 200 Bcf at 14:30 GMT later today. This news will be a reflection of last week’s extremely cold temperatures. Last year the EIA recorded an 88 Bcf pull for the period, and the five-year average is a withdrawal of 99 Bcf.

Daily Forecast

A withdrawal of more than 200 Bcf would be bullish for prices and could trigger further short-covering because it would significantly widen deficits. Additionally, the return of colder temperatures over the next 10 days could help underpin prices. Even with today’s expected huge draw, prices could remain rangebound with traders reluctant to add to bullish positions this late in the season.

Furthermore, unless extreme cold is forecast for early April, the odds favor the withdrawal season ending shortly after next week’s cold blast is fully accounted for.