Natural gas futures are trading lower on Friday, but the price action the last few days suggests more of a sideways trade. With the high reached on Tuesday and technical closing price reversal top at $2.849 in place, it looks as if traders have priced in the upcoming cold trend.
At 10:05 GMT, April natural gas is trading $2.803, down $0.009 or -0.32%.
Additionally, this week’s government storage report came in on the lower end of forecasts, encouraging profit-taking on Thursday. The weather models continue to show extremely cold temperatures moving in, but this was expected and prices have been adjusted accordingly. In the meantime, with warmer weather expected to come in shortly, buyers may struggle putting up additional gains.
Short-Term Weather Outlook
According to NatGasWeather for March 1 to March 7, “It will remain warm across the southern U.S. & Mid-Atlantic Coast into the weekend with highs of 60s to 80s, then becoming much colder this weekend through next week with lows of 20s and 30s, locally teens. The West remains cool and stormy as weather systems bring rain and snow. Most importantly, frigid air over the Plains will spread south and east this weekend through next week with widespread lows of -20s to 20s, including 20s and 30s into Texas portions of the southern U.S. for very strong national demand. Overall, national demand will be increasing to high-very high late this weekend next week.”
U.S. Energy Information Administration Weekly Storage
On Thursday, the U.S. Energy Information Administration (EIA) reported that domestic supplies of natural gas fell by 166 billion cubic feet for the week ended February 22. That was below the 172 consensus forecast.
Total stocks now stand at 1.539 trillion cubic feet, down 154 billion cubic feet from a year ago and 424 billion below the five-year average, the government said.
Daily Forecast
The market is in a position to close higher for the third straight week, but the rally has been driven by short-covering. The main trend is down. The trend will turn up on a move through $2.932. Buyers are also having trouble with the retracement zone resistance at $2.812 to $2.871.
A failure to hold $2.812 will indicate the buying is weakening. This will also indicate the expected frigid temperatures have already been priced into the market and that traders may already be looking at the next warming trend. Furthermore, there seems to be enough gas in storage to alleviate any concerns over a supply shortage.