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James Hyerczyk
Natural Gas

Natural gas futures are trading lower on Wednesday, following through to the downside after posting a dramatic closing price reversal top the previous session. The weakness is being fueled by an easing in the intensity of the cold temperatures expected in late January.

According to NatGasWeather’s midday forecast on Tuesday, the European weather model “trended notably milder” from next Tuesday through January 26 by predicting less cold air pushing into the northern United States.

At 09:28 GMT, March natural gas futures are trading $2.130, down $0.021 or -0.98%.

“While a strong cold shot remains on track for next week in the European model, the milder break January 23-26 was warmer than it had been showing,” the forecaster said, noting that this change equated to a 10 heating degree day (HDD) decline in demand expectations on top of a 6 HDD drop in the preceding overnight run.”

“Clearly, the natural gas markets are disappointed to see this milder trend,” NatGasWeather said.

Short-Term Weather Outlook

According to NatGasWeather for January 14-20, “Very cold air continues across the Northern Plains with highs of only -0s to 20s for locally strong demand. However, high pressure over the South and East will bring much warmer versus normal temperatures today and Wednesday with highs of upper 60s to 80s for Texas, South and Southeast, 40s to 60s for the Mid-Atlantic Coast and major Northeast cities. The West will see rather chilly systems the next several days. A cold shot will race across the Midwest & Northeast Thursday through Friday for a modest increase in demand, but still mostly light over the central & southern US. Overall, very light demand Tuesday-Wednesday, moderate Thursday-Sunday, then high early next week.”

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Signs of Weak Demand This Week

Genscape estimated total demand of just under 91.6 Bcf/d for Tuesday, with demand expected to potentially reach 103 Bcf/d before this week is out. Month to date, demand is “still averaging just 93.9 Bcf/d, about 6 Bcf/d behind last year’s same date stretch and nearly 10.8 Bcf/d below the five-year average,” according to the firm.

Early Look at Weekly EIA Storage Report

Energy Aspects is projecting a return to triple-digit withdrawals, issuing a preliminary estimate for a 106 Bcf pull for the week-ending January 10.

Daily March Natural Gas

Daily Forecast

The main trend is still down although the market hasn’t made a new low since January 3. The main trend will change to up on a trade through $2.290. A trade through $2.062 will signal a resumption of the downtrend.

Based on the current chart pattern, the direction of the March natural gas market on Wednesday will likely be determined by trader reaction to the pivot at $2.133. Holding this level will indicate that buyers are coming in to prevent a new contract low.  Crossing to the weak side of this level will indicate the selling pressure is increasing.

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