Natural Gas Price Fundamental Daily Forecast – Storage Withdrawals Continue to be Supportive

Natural gas futures closed higher on Tuesday while posting a trade inside the previous day’s range. This technical chart pattern tends to suggest investor indecision and impending volatility.

May Natural Gas futures settled at $2.704, up $0.026 or +0.97%.

While most traders are focusing on weather forecasts and the upcoming warmth of spring, cold weather over the short-term continues to drive some support amid lingering demand that should keep gnawing away at natural gas inventories.

Forecast

On Tuesday, the National Oceanic and Atmospheric Administration issued a forecast calling for warmer-than-normal weather for much of the country from April through June. This should hold prices in a range during that time period, but could fuel a strong short-covering rally if it leads to increased demand.

Over the short-run, however, traders will have to contend with the implications of the current and mid-range cold as storage withdrawals are expected to continue.

Technically, the key level to watch is $2.688. Look for the downside bias to continue on a sustained move under this level. Moving back above it will signal the return of buyers, however, the market has to overcome $2.716 with conviction to fuel a breakout to the upside.

Looking ahead to Thursday’s U.S. Energy Information Administration storage report, we are expecting to see a draw of about 91 billion cubic feet (bcf) in the week ended March 16.

That compares with a decline of 93 Bcf in the preceding week, a fall of 150 Bcf a year earlier and a five-year average drop of 53 Bcf.

Total natural gas in storage currently stands at 1.532 trillion cubic feet (Tcf), according to the EIA.

That figure is 718 Bcf, or around 31.9%, lower than levels at this time a year ago, and 296 Bcf, or roughly 16.1%, below the five-year average for this time of year.

In summary, don’t worry about the weather or storage report today, but pay attention to the price action and the order flow at $2.716 to $2.688. Trader reaction to this zone should tell us if the buyers or sellers are in control.