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Natural Gas Price Fundamental Daily Forecast – Light-Short-Covering on Slight Shift Higher in Heating Demand

By:
James Hyerczyk
Updated: Feb 7, 2023, 15:02 UTC

Meteorologists forecast the weather would remain mostly warmer than normal through Feb. 20 except for a few cold days around the Feb. 18-19 weekend.

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Natural gas futures are edging higher for a second session on Tuesday on forecasts for colder weather and higher heating demand this week than previously expected. On Monday, the market hit a 25-month low before rising about 2% into the close.

At 13:00 GMT, April natural gas futures are trading $2.548, up $0.013 or +0.51%. On Monday, the United States Natural Gas Fund ETF (UNG) settled at $8.49, up $0.30 or +3.66%.

Reuters is reporting that meteorologists forecast the weather would remain mostly warmer than normal through Feb. 20 except for a few cold days around the Feb. 18-19 weekend. Traders noted cold on the weekend does not boost gas use as much as cold during the workweek because usage is low on weekends when many businesses shut.

Short-Term Weather Outlook

According to NatGasWeather for Feb. 7-12, “Weather systems with mild to cool temperatures will shift over the West and Northern Plains this week with highs of 30s to 60s, while the central, southern, and eastern U.S. warms into the very nice 50s to 80s, warmest in Southern Texas and Florida.

A colder weather system will track into the central U.S. next weekend with rain, snow, and chilly highs of 10s to 30s, lows of -0s to 30s for a modest bump in national demand.

Overall, very low demand through Friday, then moderate this weekend.”

Traders Watching for New Freeport LNG Developments

Freeport LNG told Texas state regulators last week that it would start sending gas to one of three liquefaction trains at its long-shut export plant. The plant is waiting for permission from federal regulators to start loading LNG to free up space in its storage tanks. The liquefaction trains turn gas into LNG for export.

When operating at full power, Freeport can turn about 2.1 billion cubic feet (bcf) of gas into LNG each day. That is about 2% of total U.S. daily gas production. However, analysts have said they still do not expect Freeport to return to full LNG production until mid-March or later.

Short-Term Outlook

It looks like the market is trying to consolidate at a 25-month low, but so far, we’re just looking at short-covering fueled by a minor shift in the weather forecast. There is nothing to indicate that a major bottom is forming either. Furthermore, we expect to see one more flush to the downside once the last of the longs decide to throw in the towel on the winter heating season.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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