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James Hyerczyk
Natural Gas

Natural gas futures are trading lower on Friday, hitting their lowest level since December 30 as forecasts calling for warmer temperatures chase more of the weaker bullish speculators out of the market. Sellers seem to be shrugging off predictions calling for a steep storage withdrawal in today’s weekly government report. That isn’t really a surprise since it represents stale data and most professional traders tend to look 10 to 15 days forward.

At 11:24 GMT, March natural gas futures are trading $2.442, down 0.055 or -2.20%.

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“Weather is king,” Bespoke Weather Services said, “and continued warmth will keep the market under pressure.”

It Will Be Cold, but There Will Be No Severe Winter Freeze

Let’s clarify the current weather outlook. According to Natural Gas Intelligence (NGI), “Weather models have shifted both colder and warmer at various points over the past few days, injecting variability into the mid-range outlook for heating demand. Broadly, however, earlier expectations for a severe winter freeze have eased.”

“Forecasters continue to predict a solid surge of cold next week, though freezing temperatures now are not expected to extend as far as previously thought or last as long,” NGI wrote.

NGI concluded, “Meteorologists have backed off polar vortex expectations, and a warming pattern is projected to return by early next month, impacting demand for gas-powered heating.”

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US Energy Information Administration Weekly Storage Report

The EIA on Friday is projected to report the steepest pull from stockpiles of the season.

NGI’s model predicted a 191 Bcf withdrawal for the week ended January 15. That would compare with a 97 Bcf pull recorded in the year-ago period and a five-year average withdrawal of 167 Bcf.

A Bloomberg survey landed at a median expected pull of 175 Bcf, with projections ranging from decreases of 158 Bcf to 191 Bcf. A Reuters poll found estimates spanning withdrawals of 133 Bcf to 191 Bcf, with a median decrease of 178 Bcf. Bespoke estimated a 177 Bcf decline in storage.

Daily March Natural Gas

Daily Forecast

The daily chart pattern indicates a bearish tone is developing early in the session. Look for the selling pressure to continue as long as the move can be sustained under $2.485.

Overtaking $2.485 will indicate that sellers are lightening up but don’t expect a retracement to the upside unless buyers can sustain a rally over $2.552.

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

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