Natural Gas Price Fundamental Daily Forecast – Weakness Driven by Mild Temperatures, Rising Production, Falling Demand

Natural gas futures are trading lower early Friday as investors continue to react to yesterday’s U.S. government storage report and mixed weather outlook.

At 1408 GMT, April Natural Gas is trading $2.598, down $0.022 or -0.84%.

Futures up-ticked a little on Thursday, following a U.S. Energy Information Administration report that showed a higher-than-expected storage withdrawal.

The EIA announced an estimated 194 Bcf draw from storage for the wee-ended February 9, above the 183 Bcf draw expected by a consensus of analysts, and well above the 154 Bcf withdrawal average over the past five years.

The withdrawal brought the national stock deficit to the five-year average to an estimated 18.7%, according to the EIA data.

Forecast

Although the withdrawal was technically bullish, traders were unfazed by the news, as forecasts of warmer-than-average temperatures, rising production and falling demand kept a cap on any rally.

According to the National Weather Service and NatGasWeather.com, the most recent eight-to-14-day weather outlook calls for a likelihood of warmer-than-average temperatures in the Northeast, Southeast, and Midwest.

The forecast for warmer weather is expected to impact U.S. demand in the coming weeks, as over the next eight-to-14-days, U.S. demand is forecast to average 82.9 Bcf/d, an 11.3 Bcf/d drop from the average of 94.2 Bcf/d during the month of February, according to S&P Global Platts Analytics.

Platts also said the fast approaching shoulder season could also be putting a limit on rallies, as an expectation of rising production should begin to cut into the storage deficit.

The current downside momentum suggests the selling pressure is building. This could drive the market through last week’s low at $2.565 and on course for an eventual test of the December 21 bottom at $2.487.

The technical picture changes on a move through $2.661. This move could trigger a short-covering rally, but this isn’t likely to lead to a change in trend. And probably will be used to set up the next shorting opportunity.