Natural Gas Price Fundamental Daily Forecast – Record Draw News is History, Back to Weather Market

Natural gas prices soared on Thursday after a government report showed the “bomb cyclone” that held most of the U.S. in the grips of extremely cold temperatures last week led to the largest drop ever recorded for natural gas stockpiles.

February Natural Gas futures settled at $3.084, up $0.178 or +6.13%.

According to the U.S. Energy Information Administration, U.S. weekly inventories of natural gas tumbled by 359 billion cubic feet the week-ending January 5, topping the previous record decline of 288 billion four years ago. Traders were looking for a drawdown of 318 billion cubic feet.

Inventories totaled 2.767 trillion cubic feet as of January 5, 12.1 percent below the 5-year average and 13 percent below year-earlier levels, according to the EIA.

The spike in prices signaled a resumption of the uptrend. If the rally continues then traders are going to take a shot at the next pair of tops at $3.210 and $3.320.

Forecast

The news is out and traders reacted the way they were supposed to given the fresh EIA data. The numbers came in better-than-expected so the market rose. The move was fueled by a combination of short-covering and speculative buying.

Traders are already moving on to next week’s report and the next weather forecast.

According to the latest data from Radiant Solutions, a cold spell is set to descend on the eastern half of the country next week. Above-normal temperatures are expected from Texas to New York the week after.

Even though we saw a record gas draw, producers will be able to replace the gas used fairly quickly as long as the weather warms and demand stays low.

Given the current weather outlook and expected increased production, we’re probably looking at a rangebound trade, but with a slight upside bias.

The key level controlling the direction and the bias of the market is $2.941. Holding above this level will indicate buyers are coming in to sustain the rally. Falling below this level will put the market in a vulnerable position.