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Natural Gas Price Fundamental Daily Forecast – Neutral EIA Report Keeps Focus on Low Demand Outlook

By:
James Hyerczyk
Updated: Dec 7, 2021, 01:35 UTC

Bespoke Weather Services said the 59 Bcf draw “is a very neutral number, doing nothing to alter the picture,” NGI reported.

Natural Gas

In this article:

Natural gas futures dropped more than 5% on Thursday to a fresh three-month low before rebounding slightly into the close. The catalysts behind the selling pressure were forecasts calling for milder weather, less heating demand until mid-December than previously expected, a decline in gas prices overseas and an easing of liquefied natural gas (LNG) exports.

At 20:45 GMT, January natural gas futures are trading $4.113, down $0.145 or -3.41%.

The news was bearish enough to offset a small reduction in output and a slightly bigger-than-expected withdrawal last week when colder-than-normal weather boosted heating demand.

US Energy Information Administration Weekly Storage Report

The EIA reported on Thursday that domestic supplies of natural gas fell by 59 billion cubic feet (Bcf) for the week-ended November 26. That matched the average decline forecast by analysts polled by S&P Global Platts, and compared with a five-year average decrease of 31 Bcf for the period.

Ahead of the government report, Natural Gas Intelligence (NGI) said “Major surveys had coalesced around a withdrawal in the high 50s Bcf. The median projection in Bloomberg and Reuters polls was a 58 Bcf pull. NGI also modeled a 58 Bcf draw.”

Total stocks now stand at 3.564 trillion cubic feet (Tcf), down 375 Bcf from a year ago and 86 Bcf below the five-year average, the government said.

Looking ahead to next week’s EIA report, early estimates were for a withdrawal in the 40s Bcf and 50s Bcf.

Reaction to EIA report

Bespoke Weather Services said the 59 Bcf draw “is a very neutral number, doing nothing to alter the picture,” NGI reported.

The figure reflects balances being a little tighter than the five-year average, according to the firm. Its model is pointing to an end-of-season storage level around 1,550 Bcf.

Short-Term Outlook

The current downside momentum has put the August 19 bottom at $4.009 on the radar. Thursday’s low at $4.402 stopped just short of this level before the market bounced higher. This could be an early sign of light short-covering.

If 4.009 fails as support then look for the selling to possibly extend into the July 2021 bottoms at $3.836 and $3.716.

Daily January Natural Gas

At this time, traders are pricing in warm temperatures over the next two weeks. This means the next report for December 16 to December 31 could make or break this market.

“The market has been waking up to the fact that December will be a warmer month than usual,” Refinitiv analyst John Abeln said.

“This doesn’t preclude weather from getting much colder in January or February. But if the first part of

Winter is warm, that does reduce the risk that storage will be at extremely low levels by the end of the Winter withdrawal season,” he said.

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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