Natural Gas Price Fundamental Daily Forecast – Weak Trade Suggests Sellers Not Worried about EIA Massive Draw

Natural gas futures are edging lower shortly before the release of the government’s weekly storage report at 15:30 GMT. Traders are looking for a bullish draw with the print expected to increase the year-on-five-year average deficit to greater than 200 Bcf.

However, there are still some concerns that the warmest January weather patterns on record will rapidly improve deficits to near par versus the five-year averages and maybe even flipping to the surplus side of the equation.

At 13:50 GMT, March natural gas futures are trading $3.591, down $0.189 or -5.00%. On Wednesday, the United States Natural Gas Fund ETF (UNG) settled at $13.21, up $0.43 or +3.37%.

Short-Term Weather Outlook

According to NatGasWeather for Jan. 5-11, “Warmer than normal conditions will rule the southern and eastern U.S. most of the next 7-days with highs of 30s to 50s across the Great Lakes, Ohio Valley, and Northeast and very nice upper 50s to 70s over the southern U.S. and up the Mid-Atlantic Coast for very light national demand.

There will be a minor bump in demand late this week and again late next week as mild weather systems track into the East.

The West Coast will be wet and windy with heavy valley rains and mountain snows as a storm tracks inland the next several days with highs of 40s to 60s.

Overall, traders should look for low to very low national demand the next 7-days.”

Energy Information Administration Weekly Storage Report

Ahead of today’s EIA weekly storage report, covering the week-ended Dec. 30, traders are widely expecting a much larger-than-normal withdrawal.

Natural Gas Intelligence (NGI) is reporting that projections submitted to Reuters ranged from withdrawals of 153 Bcf to 269 Bcf, with a median pull of 237 Bcf. A Bloomberg survey landed at a median pull of 240 Bcf. The Wall Street Journal’s poll found draw estimates from 156 Bcf to 265 Bcf and an average of a 228 Bcf pull.

NGI estimated an inventory decrease of 237 Bcf.

NatGasWeather is saying, “What’s likely to aid volatility today is the morning EIA storage report, where there’s a large spread in estimates between -220 and -270 Bcf, and with national surveys ranging between -231 and -245 Bcf, but with the most notable at -245 Bcf and likely where market expectations are.

It was colder than normal over much of the U.S. besides the West. We expect a draw of -241 Bcf, much larger than the 5-year average of -98 Bcf, although tricky due to the Christmas Holiday, widespread freeze-offs from an Arctic Blast, and stronger week over week wind energy generation.”

Short-Term

Besides a robust draw from storage, oversold technical factors as well as increasing expectations of greater LNG demand in January could underpin the market. The news could chase some of the weaker shorts out of the market, fueling a short-covering rally, but not necessarily leading to a change in trend.

Although the warm weather is wreaking havoc with demand, traders are saying the uncertainty over when Freeport LNG will return to service is also weighing on sentiment.