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James Hyerczyk
Natural Gas

Natural gas futures are inching higher on Thursday shortly before the regular session opening and the release of the weekly government storage report at 15:30 GMT. Short-covering and position-squaring ahead of the report is helping to underpin prices as well as a slight change in the weather forecast that is indicating colder trends for later this month into early December.

At 11:44 GMT, January natural gas futures are trading $2.615, up $0.004 or +0.15%.

Short-Term Weather Forecast

According to NatGasWeather for November 21 – 27, “One weather system will track across the Great Lakes into the Northeast today, while a second system tacks through the West with/rain and snow. However, these systems won’t bring much added demand since they are only slightly cool for this time of year with highs of upper 30s to 50s. The rest of the US will be mild to warm today with highs of 60s & 70s, warmest over Texas and the South, then cooling as the western US system tracks through Friday, eventually reaching the East this weekend. High pressure will bring warmer conditions over the eastern half of the country next week as cold air pours into the West. Overall, moderate demand.”

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US Energy Information Administration Weekly Storage Report

Today’s EIA report, due to be released at 15:30 GMT, is expected to officially kick-off the withdrawal season. Traders are saying today’s report that covers the week-ended November 15 is likely to show a much larger-than-average withdrawal in the upper 80s Bcf. A consensus of analysts is pegging 86 Bcf as the over/under level.

Bloomberg analysts are looking for a median prediction of 88 Bcf, with estimated withdrawals ranging from 82 Bcf to 99 Bcf. The ICE EIA Financial Weekly Index futures settled Tuesday at minus 87 Bcf. Natural Gas Intelligence (NGI) is predicting a 101 Bcf withdrawal.

Daily Forecast

Bearish fundamentals have driven prices sharply lower this week. This trend is likely to continue since it will likely take “substantially colder forecasts” to offset the downward price pressure exerted by an increasing year/year storage surplus and “bearish fundamentals,” according to analysts at EBW Analytics Group.

However, we do realize that markets can become technically oversold especially when approaching major support areas, so we’re not going to be surprised if a bullish withdrawal triggers a short-covering rally today.

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