Natural Gas Price Fundamental Weekly Forecast – Mixed Forecast for Feb 5-9 Keeping Traders Guessing

Natural gas futures closed lower last week despite forecasts calling for another Arctic blast over the week-end and into the end of January. The problem with the forecast is the uncertainty after February 4. Helping to pressure prices was a weak performance in the spot market.

Prices bottomed mid-week and recovered some of the week’s losses into the close on Friday. Speculators may have been pricing in a new forecast calling for another round of frigid temperatures into February.

Potentially bullish comments from Bespoke Weather Services were also supportive on Friday. “However, through the week it became clear that the cold shot to close out January and bring in February was the real deal, and also that cold risks can easily return into the middle of February,” Bespoke Weather Services said.

Last week, March natural gas settled at $3.072, down $0.167 or -5.16%.

Buyers are being cautious after being burned in December by cold weather forecasts. “Many traders opted to sell now and ask questions later,” Bespoke Weather Services said.

U.S. Energy Information Administration

On Thursday, the EIA reported a 163 Bcf withdrawal for the week-ending January 18. This number was mixed. While falling on the bullish side of the weekly estimates, it failed to impress when compared to the five-year average which came in at 183 Bcf. It was also well-below last year’s 273 Bcf withdrawal for the same period a year ago.

Short-Term Weather Outlook

According to NatGasWeather for the period January 25 to 31, “A strong cold blast will sweep across the Midwest and East into the weekend with lows dropping into the -10s to 20s for very strong demand. A brief break will follow to start next week ahead of the strongest polar blast in the series Tuesday through Friday where lows will drop into the -30s to 20s for very strong demand. The West will see a mix of mild, cool, and cold. Overall, national demand will be high to very high.”

Forecast

The hang-up for traders is the forecast for a milder trending pattern February 5 to February 9, which sees less cold air across the northern U.S. The European model see colder temperatures during this time period.

Next week’s direction will be determined by how this time period plays out. We’re likely to see a sideways, choppy trade if the forecasts continue to clash. The market is likely to turn bullish if the forecasts point to increased demand. We could revisit recent lows if both forecasts turn bearish.