Natural Gas Price Fundamental Daily Forecast – Weak as Polar Blast Makes Way for Milder Trend

Natural gas futures are trading flat on Monday while hovering slightly above their January lows. The range is tight and inside yesterday’s range which tends to indicate investor indecision and impending volatility. On Monday, the market gapped lower on the daily chart and held the gap throughout the session as weather updates pointed to a drop in demand next week-end.

At 0733 GMT, March natural gas futures are trading $2.875, up 0.002 or +0.07%.

Short-Term Weather Outlook

According to NatGasWeather for the period January 28 to February 2, “A brief milder break will sweep across the East Monday with temperatures reaching the 40s to 60s besides colder air across New England. However, a dangerous polar blast will be advancing into the Midwest the next couple days with frigid lows of -40F to -0s, then spreading across the Ohio Valley and Northeast for extremely strong demand. Heavy snow will accompany the cold front across the Midwest Monday, then with increasing snowfall across the South & Southeast, and East Tuesday – Wednesday. The polar blast will exit Friday-Saturday with strong warming to follow next weekend. The West will be mild across coastal states but colder for the Mountain West. Overall, national demand will increase to very high Tuesday to Friday, then easing.”

6-10 Day Forecast

Radiant Solutions is now calling for “significant warm changes” compared to last Friday’s weather forecast.

“This comes in response to a lifting of the polar vortex northward and an increasingly active storm track into North America,” the forecaster said. “The first disturbance enters the West at the start of the period and quickly sends moisture eastward toward the Midwest by mid-period.”

“Temperatures are forecast to rise into the above and in some cases strong above normal categories out ahead of this disturbance; although, troughing left in its wake has bellows gaining coverage” out west.

U.S. Energy Information Administration

At the start of the week, Total Lower 48 working gas in underground storage stood at 2,370 Bcf, 305 Bcf (11.4% below the five-year average but 33 Bcf (1.4%) higher than last year’s stocks, according to the U.S. Energy Information Administration.

The EIA also reported a decrease in production the week-ending January 18 to 87.4 billion cubic feet per day (Bcfd), compared to 88.3 Bcfd the week before.

Forecast

Prices could hold steady over the next few days if there is increased demand in the cash market, but any rally will likely be a new shorting opportunity. Buyers are obviously disappointed.

Looking ahead to the next two EIA reports, NatGasWeather is saying that “the current polar cold pattern to close out January should help widen the year-on-five-year average storage deficit back above 400 Bcf over the next two EIA reports, but the mild break in early February would shrink deficits once again.”

Buyers are likely to be scarce over the near-term unless the weather systems flips back to extreme cold. If there are any up moves, they are likely to be fueled by short-covering or position-squaring as investors react to technically oversold conditions.