Natural Gas Price Fundamental Daily Forecast – Speculators Eyeing Jan 8-12 Period for Strong Demand

Natural gas futures are trading steady-to-better early Thursday as traders await the release of the latest government storage report at 15:30 GMT. This follows yesterday’s volatile trade that was fueled by the January futures contract expiration and reports calling for colder weather and higher heating demand over the next two weeks.

At 11:52 GMT, March natural gas futures are trading $3.730, up 0.034 or +0.92%.

Short-Term Forecast

According to NatGasWeather for December 30-January 5, “National demand will remain light through Saturday as warm temperatures rule the southern and eastern U.S. with highs of 50s to 80s.

Demand will be strong across the West and Midwest as weather systems track through with rain, snow, and frosty lows of -10s to 30s, highs of 0s – 40s.

National demand will increase this weekend as cold air over the Midwest spreads south into Northern Texas and across the Ohio Valley & Northeast.

Overall, low national demand through Saturday, then high Sunday – Monday.

US Energy Information Administration Weekly Storage Report

Traders are expecting to see some volatility following the release of the EIA government storage report at 15:30 GMT. This is because the holiday season throws off the numbers. Ahead of the report, there is a wide range of guesses, with no clear indication of how steep inventories may fall.

According to Natural Gas Intelligence (NGI), a Wall Street Journal survey of 11 analysts produced a range of withdrawal estimates from 66 Bcf to 128 Bcf, with an average draw of 114 Bcf. A Reuters poll had an even wider range, with a median pull of 126 Bcf. NGI modeled a 142 Bcf withdrawal.

For reference, the EIA recorded a 120 Bcf draw in the same week last year and the five-year average pull is 121 Bcf.

Daily Forecast

Look for volatility following the release of the EIA report. But once the market settles down, the focus will shift back to the weather.

“To our view, it’s important the January 8-12 period hold strong demand across the northern U.S., or it could lead to disappointment,” NatGasWeather said.

“Bulls were able to rally February 2022 prices over $4” on Wednesday morning, “before strong selling dropped prices back under it.”

Technically, the key level to watch for March natural gas is $3.964. Taking out this level could trigger an acceleration to the upside with $4.378 the next potential target.

On the downside, we’re looking for traders to continue to defend $3.430 to $3.186 since it’s still too early in the winter to give up on the long side altogether.