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James Hyerczyk
Natural Gas

Natural gas futures are extending this week’s gains on Wednesday as the forecasts continue to shift toward even colder temperatures, building on the bullish predictions from over the weekend. The price action suggests speculators are not only betting on the cold to continue into the end of January, but possibly into the first week of February.

At 13:07 GMT, March natural gas futures are trading $2.704, up $0.068 or +2.58%.

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Natural Gas Intelligence (NGI) is reporting that both the domestic and European weather models produced forecasts that, if they hold up, could make the coming two weeks colder than the five-year average.

Futures caught “a dead of winter skew to the upside,” as Mizuho Securities USA’s director of energy futures Robert Yawger put it.

Cash Market Higher

Meanwhile, NGI’s Spot Gas National Average posted a third-consecutive gain amid the intensifying winter chill, advancing 12.0 cents on Tuesday to $2.850. A day earlier and last Friday, cash prices rose 9.0 cents each day.

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Deep Freeze Could Spread

With a deep winter freeze settling across the northern Plains and Midwest, NatGasWeather is expecting the frigid conditions to expand and generate strong national demand Wednesday through Friday, “as cold air spreads across the northern and eastern U.S.”

LNG Volumes Rising

NGI reported futures also got a boost from U.S. liquefied natural gas (LNG) momentum. Following weather-induced delays that dropped LNG volumes well below 10 Bcf/d last week, export levels rebounded back above 11 Bcf on Monday, according to NGI data, and remained atop that threshold on Tuesday – near record levels.

Early Look at Thursday’s EIA Report

Analysts are anticipating a triple-digit withdrawal for the week-ended January 22, though not quite as steep as the week before because of milder temperatures. However, the report covering the week-ended January 29 is forecast to show a huge draw.

Preliminary results of a Bloomberg survey on Tuesday showed estimates for the January 22 week ranging from pulls of 138 Bcf to 143 Bcf, with a 141 Bcf median.

Daily March Natural Gas

Daily Forecast

A potentially bullish secondary higher bottom has formed at $2.425 on the swing chart. The current swing chart pattern indicates that $2.992 is a potential upside target over the next seven sessions.

The 50% to 61.8% retracement zone at $2.630 to $2.678 is controlling the direction of the market today.

A sustained move over $2.678 will be a sign of strength. This could create the upside momentum needed to challenge a cluster of levels at $2.794, $2.835 and $2.918.

A sustained move under $2.630 will be a sign of weakness. This won’t change the trend to down, but it could lead to a test of $2.552 to $2.485.

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

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