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James Hyerczyk
Natural Gas

Natural gas futures declined on Friday, pressured by a drop in cash prices as forecasts continued to call for warmer temperatures over the near-term, leading to predictions of lighter heating demand. Although the government storage report exceeded last year’s pull and the five-year average withdrawal, Friday’s results had no impact on market sentiment.

On Friday, March natural gas futures settled at $2.456, down $0.041 or -1.64%.

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US Energy Information Administration Weekly Storage Report

The EIA on Friday reported the steepest pull from stockpiles of the season.

Storage inventories decreased 187 Bcf to 3.009 Tcf for the week-ended January 15. The report was issued one day later than usual due to federal offices being closed for the U.S. presidential inauguration on January 20.

Lower temperatures propelled residential-commercial and industrial demand nearly 4 Bcf/d higher week over week, according to S&P Global Platts Analytics.

Storage volumes now stand at 3.009 Tcf and 36 Bcf, or 1.2%, more than the year-ago level of 2.973 Tcf, and 198 Bcf, or 7%, more than the five-year average of 2.811 Tcf.

Ahead of the report, Natural Gas Intelligence’s (NGI) model predicted a 191 Bcf withdrawal for the week ended January 15. A Bloomberg survey landed at a median expected pull of 175 Bcf, with projections ranging from decreases of 158 Bcf to 191 Bcf. A Reuters poll found estimates spanning withdrawals of 133 Bcf to 191 Bcf, with a median decrease of 178 Bcf. Bespoke estimated a 177 Bcf decline in storage.

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Short-Term Outlook

EBW Analytics Group noted that the mid-range outlook was murky, given substantial shifts in weather models over the past week.

“This exceptionally high model volatility could result in continued sharp price swings,” EBW said. “It stems from strong bullish signals in the Arctic and over Greenland, coupled with uncertainty in the Pacific and the tropics.”

Technically, the direction of the March natural gas futures contract is being controlled by the 50% to 61.8% retracement zone at $2.485 to $2.552.

A sustained move under $2.485 will indicate the selling pressure is getting stronger. This could lead to an eventual retest of the main bottom at $2.268.

A sustained move over $2.552 will signal the presence of buyers. This move could create the upside momentum needed to challenge a retracement zone at $2.630 to $2.678.

For a look at all of today’s economic events, check out our economic calendar.

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