Natural Gas Price Fundamental Weekly Forecast – Short-covering Expected Over $2.661, Selling Resumes Under $2.565

Natural gas futures inched higher last week as investors reacted to the U.S. government storage report and mixed weather outlook.

April Natural Gas futures settled the week at $2.598, up $0.001 or +0.04%.

Earlier in the week, the U.S. Energy Information Administration (EI) announced an estimated 194 Bcf draw from storage for the week-ended February 9, above the 183 Bcf draw expected by a consensus of analysts, and well above the 154 Bcf withdrawal average over the past five years.

The withdrawal brought the national stock deficit to the five-year average to an estimated 18.7%, according to the EIA data.

According to the National Weather Service and NatGasWeather.com, the most recent eight-to-14-day weather outlook calls for a likelihood of warmer-than-average temperatures in the Northeast, Southeast, and Midwest.

The forecast for warmer weather is expected to impact U.S. demand in the coming weeks, as over the next eight-to-14-days, U.S. demand is forecast to average 82.9 Bcf/d, an 11.3 Bcf/d drop from the average of 94.2 Bcf/d during the month of February, according to S&P Global Platts Analytics.

Forecast

The trend is down on the weekly chart, but may be a little oversold. We’re looking at the possibility of two scenarios this week.

If sellers can’t press the market lower then traders may decide to start taking profits. This could trigger the start of a short-covering rally.

A trade through $2.661 could trigger a breakout to the upside with the next likely target $2.774.

A trade through $2.565 will indicate the selling is getting stronger with the next target $2.487.

Looking ahead to this week’s EIA report, the market is expecting a 110 Bcf draw for the week-ending February 16. This will be slightly better than the -92 Bcf from last year and the -145 Bcf five-year average.

Demand likely dropped materially last week as weather was warmer than normal. Additionally, bearish weather is expected to continue into the end of the month.