Natural Gas Price Fundamental Daily Forecast – Traders Monitoring Weather Patterns for Hints of Colder Temps

Natural gas futures are edging higher on Monday but gains are being capped by end of the month warmth in the weather models.

Smack dab in the middle of January and traders are still concerned about the warm temperatures that have layered across much of the country since late December.

Weather models had hinted that colder weather would finally return by Jan. 24, but the latest data backed off the intensity and reach of frigid Canadian air. That said, temperatures at least should move back toward more seasonal levels, according to NatGasWeather.

Until then, the forecaster said the mild weather and modest gas demand should continue to improve storage inventories.

At 13:20 GMT, March natural gas is trading $3.337, up $0.141 or +4.41%. On Friday, the United States Natural Gas Fund ETF (UNG) settled at $11.03, down $0.73 or -6.21%.

Short-Term Weather Forecast

According to NatGasWeather for Jan. 16 – Jan. 22, “Most of the U.S. will be warmer versus normal with highs of 30s to 50s in northern U.S. and 50s to 70s in southern U.S. for very light demand besides colder 20s in the Northern Plains.

US Storage Surplus on Horizon

Last Thursday, the U.S. Energy Information Administration (EIA) said a net 11 Bcf was injected into underground storage for the week ending Jan. 6. It was a rare build during what is considered one of the peak months of winter, according to Natural Gas Intelligence (NGI).

Total working gas in storage climbed to 2,902 Bcf, which is 140 Bcf below last year at this time and 40 Bcf below the five-year average, EIA said.

Looking ahead to the next two government inventory reports, NatGasWeather said the lack of significant heating demand this month would likely boost stocks to a 150 Bcf surplus to the five-year average. This would occur as chillier weather is set to arrive.

Short-Term Outlook

We’re not expecting too much volatility on Monday due to the U.S. Martin Luther King Jr. holiday. Nonetheless, traders will be focused on the weather since there is the potential for a flip to colder temperatures.

While some traders are focusing on the return of Freeport LNG to rescue the market from lower prices, gains could be capped since U.S. natural gas output is on track to rise about 2% this year and next, according to government forecasts.