Natural Gas Price Fundamental Weekly Forecast – Market on Uncertain Path Towards Sufficient Storage Builds

Natural gas futures settled higher last week but off their highs after an attempt to breakout to the upside failed to draw enough buyers to continue the move. The buying stopped when the weather models started to show warming trends and the government report fell short of expectations.

Last week, April natural gas futures settled at $2.991, up $0.115 or +4.00%. This was down from a high of $3.060.

Spot Gas Prices Balloon

“Spot gas prices ballooned last week to the thousands and one of the biggest states in the country left more than four million of its residents in the dark and cold during a prolonged, unprecedented Arctic freeze,” according to Natural Gas Intelligence (NGI). NGI’s Weekly Spot Gas National Average rocketed $16.855 higher week/week to $33.680.

Energy Information Administration Weekly Storage Report

Last Thursday the Energy Information Administration (EIA) reported a 237 withdrawal from U.S. gas stocks for the week-ended February 12, a print that disappointed versus consensus expectations but came in much larger than the year-ago 141 Bcf draw and the 142 Bcf five-year average.

Total working gas in storage stood at 2,281 Bcf as of February 12, down 105 Bcf from year-ago levels and 57 Bcf above the five-year average, EIA said.

Short-Term Weather Outlook

According to NatGasWeather for February 22-29, “A weather system with rain and snow will track across the Ohio Valley and Northeast Monday, with showers extending all the way to the South and Southeast. But overall, conditions will be much milder Monday through Wednesday compared to last week with highs of 50s to 70s over the southern U.S. and 30s to 50s over the northern U.S. A cold front will dive down the Plains late in the week, while a second system sweeps across the Midwest, Great Lakes, and Northeast Thursday through Saturday with lows of 0s to 30s for a swing back to strong national demand.”

Weekly Forecast

Although the futures market failed to follow the cash market sharply higher last week, it could continue to be underpinned this week because the cold weather is expected to linger in key demand areas and could actually return with a vengeance the first week of March.

Mobius Risk Group analysts said, “If colder-than-normal temperatures linger longer than expected (Friday’s 6- to 10-day weather forecasts hinted at this) or another cold shot or two arrive in March, the NYMEX curve may finally begin to reflect the very uncertain path towards sufficient storage builds during the summer 2021 injection season.”

Furthermore, Morgan Stanley Research analysts said it was lowering its end-of-March inventory estimate to 1.413 Tcf, down from 1.466 Tcf. Reaching this level would bring stocks 30% below last year and 20% lower than the five-year average.

For a look at all of today’s economic events, check out our economic calendar.