Natural Gas Price Fundamental Daily Forecast – Slightly Warmer European Model Capping Gains

Natural gas futures are trading nearly flat on Friday as traders try to shake off yesterday’s bearish print in the U.S. Energy Information Administration’s (EIA) weekly storage report. Next week’s storage pull is expected to be even larger, but the price action suggests it may have already been built into the market.

It also suggests that bullish trader would really like to see huge, back to back to back storage draws in 200 Bcf neighborhood.

At 14:14 GMT, March natural gas futures are trading $2.653, down $0.014 or -0.56%.

Traders are still looking for cold temperatures this weekend, but a shift toward warmer in the European model overnight for early next week is bringing in the sellers early in the session on Friday.

The current setup appears to be skewed to the upside, but that could change quickly if the expected cold fails to materialize. Any verification of cold at the midday forecast could launch a strong rally into the close.

Short-Term Weather Outlook

According to NatGasWeather for January 29 to February 4, “A strong storm continues to bring rain and snow across the West with cool highs of 30s to 50s. Chilly highs of 10s to 40s covers the northern half of the U.S. for strong national demand, although would be more impressive if the southern U.S. weren’t mild with highs of 50s to 70s.

National demand will ease late this weekend and next week as high pressure builds across the central and southern U.S. with highs of 40s to 70s but still with slightly cool weather systems over the West and East with highs of 30s to 50s.”

US Energy Information Administration Weekly Storage Report

Prices fell sharply following the release of a bearish government storage report on Thursday. The U.S. Energy Information Administration (EIA) reported a withdrawal of 128 Bcf natural gas from storage for the week-ended January 22. The print was notably lighter than a week earlier and came in well below the mid-point of analysts’ estimates.

Ahead of the government storage data, NGI reported that Bespoke anticipated the EIA to report a draw of 140 Bcf for the week-ended January 22.

Short-Term Outlook

The direction of the market on Friday will be determined by how fast traders can forget about Thursday EIA report and shift their focus to next week’s report that is expected to show a steeper pull. Early estimates are calling for pulls of around 160 Bcf to 200 Bcf.

Technically, trader reaction to a retracement zone at $2.630 to $2.678 will set the tone on Friday.

Look for a bullish tone to develop on a sustained move over $2.678 and for a bearish tone to develop on a sustained move under $2.630.

The best upside target zone is $2.794 to $2.918. The most likely downside target area is $2.552 to $2.485.