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James Hyerczyk

Natural gas is trading higher on Friday after shrugging off earlier weakness. The market was pressured before the regular session opening by weather reports showing the intensity of the upcoming cold was abating. Traders are a little nervous holding positions over the weekend so we could see a volatile two-sided trade today with most of the focus on the midday weather updates.

At 14:47 GMT, March natural gas is trading $1.846, up $0.019 or +0.99%.

Short-Term Weather Outlook

NatGasWeather said both the American and European datasets shed heating demand from their respective forecasts overnight. That explains the early weakness.

“The data still shows solid cold shots into the U.S. the next eight days, just not quite as cold with the one during the second half of next week and with breaks before and after being milder,” the forecaster said. “The data is still colder that it was at the start of the week, but the natural gas markets could be disappointed if weather patterns this winter keep finding a way to trend milder in time, as they did once again overnight.”

“Whether this sticks will be the focus of today’s midday update ahead of the long President’s Day holiday weekend. Even with milder overnight trends, there will still be nice swings in demand; it’s just milder breaks between cold shots prevent the pattern from looking more ominous.”


U.S. Energy Information Weekly Storage Report

On Thursday, the EIA reported a 115 Bcf withdrawal from storage for the week-ending February 7. This was a little on the bullish side of the estimates, but since it was old news, it didn’t have much of an effect on prices.

The reported draw was above last year’s 101 Bcf figure, but below the five-year average draw of 131 Bcf.

Total working gas in underground storage stood at 2,494 Bcf as of February 7, 601 Bcf higher than year-ago stocks and 215 Bcf higher than the five-year average, according to EIA.

Daily March Natural Gas

Daily Forecast

The price action is still potentially bullish. Holding above $1.847 will indicate strength, while a sustained move under $1.797 will signal weakness.

Taking out $1.869 will change the minor trend to up. This will also shift momentum to the upside. The main trend will change to up on a trade through $1.906.

If $1.797 fails late in the session then look for a near-term retest of $1.753.

Look for volatility with the release of the midday weather updates.

The weekend is going to be full of surprises so there is a good chance we’ll see a gap opening at the start of next week.

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