Natural Gas Price Fundamental Daily Forecast – Potentially Bullish Chart Pattern Forms Ahead of EIA Report

Natural gas futures are inching higher on Thursday shortly before the release of the government’s weekly storage report. During the previous session, the market formed a potentially bullish technical chart pattern, but so far, the pattern has not been confirmed.

At 14:00 GMT, April Natural gas futures are trading $2.338, up $0.040 or +1.74%. On Wednesday, the United States Natural Gas Fund ETF (UNG) settled at $7.58, up $0.37 or +5.13%.

Wednesday’s Recap – Potentially Bullish Technical Reversal Bottom

Natural gas futures jumped nearly 5% on Wednesday on forecasts for colder weather than previously expected and as investors aggressively covered short positions following steep declines. The size of the reversal in the market suggests we may have hit a bottom, but technicians still need a follow-through rally to confirm the chart pattern.

Meanwhile, nearby futures prices dipped below the $2 per mmBtu level for the first time since Sept. 2020 in overnight trading.

Short-Term Weather Outlook

According to NatGasWeather for Feb. 23-Mar. 1, “A stormy pattern will impact the western and northern US with areas of rain and snow, while cool to very cold with lows of -10s to 30s. Texas, the South, and much of the East will be under strong high pressure today with very nice highs of 60s to 80s for light demand.

Frigid air over the Midwest will spread across the Ohio Valley and Northeast Friday-Saturday with snow and lows of -0s to 30s for strong demand, then warming Sunday-Wednesday for light demand.”

Energy Information Administration Weekly Storage Report

NatGasWeather is saying, “For today’s EIA weekly storage report, there’s a large spread in survey averages between -59 and -72 Bcf, but with the most notable at -65 Bcf and likely where market expectations are. It was much warmer than normal over the eastern ½ of the US, while cool to cold over much of the West. We expect a draw of -64 Bcf, much smaller than the 5-year average of -177 Bcf. If close, this will increase surpluses to just under +300 Bcf.”

Natural Gas Intelligence (NGI) expects to see “a significantly lighter-than-average winter withdrawal in the latest round of government inventory data.”

Pre-report surveys point to a withdrawal in the upper 60s Bcf from the Energy Information Administration’s (EIA) storage report at 15:30 GMT, for the week-ended Feb. 17.

NGI is reporting that a Reuters poll of 14 analysts showed estimates ranging from 51 Bcf to 100 Bcf, with a median pull of 68 Bcf. A Wall Street Journal survey had the same range and averaged at a 69 Bcf draw. NGI modeled a 70 Bcf pull. Bloomberg produced a median draw of 59 Bcf, but based on a smaller survey.

Short-Term Forecast

Our work indicates a 60 Bcf pull in today’s EIA report. A number close to this figure would significantly widen the surplus to the five-year average. The five year average draw for the period is 177 Bcf. Inventories stood at 2,266 Bcf as of Feb. 10, an 8.8% (plus 183 Bcf) surplus to the five-year, according to the EIA.

Technically speaking, a trade through $2.422 for the April natural gas contract will confirm Wednesday’s closing price reversal bottom. This could trigger the start of a 2 to 3 day counter-trend rally with $2.685 – $2.819 the minimum upside target zone.