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James Hyerczyk
Natural Gas

Natural gas futures are trading flat shortly after the opening on Wednesday. However, the market did post a higher-high for the third straight session, suggesting light short-covering and perhaps a little speculative buying. Volatility remains low as traders peruse the latest weather forecasts for any hint of a lingering cold spell. Some speculators are also looking for early signs of a short-squeeze due to the huge short positions held by traders.

At 14:52 GMT, February natural gas is trading $2.151, down $0.011 or -0.51%.

Daily February Natural Gas

Traders Looking for Weather Clarity

Natural Gas Intelligence (NGI) said Wednesday, traders are awaiting more clarity from the weather models on the extent of frigid temperatures expected later this month.

NatGasWeather said, models have been going back and forth on the amount of cold expected to move into the Midwest and Northeast starting late next week.

“This was again true overnight as the data trended colder Tuesday only to flip back a little milder overnight,” NatGasWeather said. “No major changes, as after a quick cold shot across the Midwest and Northeast today, an overall rather bearish setup is still on track through January 16.”

“Cold air remains on track to release out of the Rockies and sweep across the Midwest and Northeast January 17-20 for a bump in national demand,” the forecaster said. However, “the weather data is really struggling and inconsistent on how much Arctic air will ultimately arrive” during this period. “As such, expect changes in the days ahead” until models lock in on the pattern, “with the risk toward colder trends.”

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Early Look at Weekly Storage Report

Thursday’s U.S. Energy Information Administration weekly storage report is expected to show a withdrawal of 45 to 57 Bcf for the week-ending January 3.

Energy Aspects is saying, the size of the withdrawal will be limited by “a continuation of the holiday impact and even milder weather.”

Daily Forecast

The main trend is down according to the daily swing chart. However, momentum has been trending slightly higher since the formation of the closing price reversal bottom on January 3 at $2.083.

The lack of clarity from the weather models and a few speculators betting on a short-squeeze is probably providing the support.

The short-term range is $2.351 to $2.083. Its 50% to 61.8% retracement zone at $2.217 to $2.249 is the primary upside target.

The main trend will change to up on a move through $2.351, while taking out $2.083 will signal a resumption of the downtrend.

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