Natural Gas Price Fundamental Weekly Forecast – Rally Pauses Amid Worries Over Feb 15 – 28 Forecast

Natural gas futures soared last week, but posted a disappointing close on Friday, suggesting bulls had lost some confidence in the longer-term forecasts. This led to renewed tensions over the weekend forecast, which could be laying the groundwork for a volatile trade this week. According to Natural Gas Intelligence (NGI), gains failed to hold late in the week as the long-range outlook showed signs of the deep freeze fading later this month.

Last week, March natural gas futures settled at $2.863, up $0.299 or +11.66%.

The bright spot continued to be cash prices. They strengthened as the polar plunge descended into the Midwest before slowly crawling toward the East Coast.

Near-Term Weather Outlook

The week-ended with NatGasWeather saying moderate demand over the past week began increasing on Friday as a frigid Arctic shot over Western Canada advanced into the U.S. Rockies and Plains. The biting cold was seen spreading across the Great Lakes, Ohio Valley and Northeast, sending temperatures plummeting to some 20 degrees below zero in some areas. Bitter conditions were forecast into North Texas, the South and the Southeast.

However, the weather service backed off the amount of bone-chilling air that would circulate farther south, but NatGasWeather said a consequence of the cold being slower to initially release is that it allows it to build to more “dangerous/impressive” levels when it finally does so around February 11-15.

NGI said “that even with a solidly frigid outlook for the first half of the month, and the likelihood of supply cuts, traders quickly showed their displeasure with the Friday afternoon run of the European weather model. The latest data wasn’t quite as cold for the 15-day period, giving back about 15 Bcf of demand.”

Though still “impressively cold,” NatGasWeather said it was “easily possible” the data would back off the forecast demand. “This was bad timing for bulls,” the firm said, and if the model were to trend any milder, “it could lead to major disappointment, especially if the Global Forecast System were to follow suit.”

NatGasWeather also said the latest European model continues to show “easily the coldest pattern of the past few years, but bulls appear to have gotten spooked that more demand could be shed over the weekend and ran for the exits.”

Weekly Forecast

Tudor, Pickering, Holt & Co. (TPH) analysts said combined with the accompanying freeze-offs, the Energy Information Administration’s (EIA) next reported withdrawal on Thursday should push well into the 200s Bcf. Furthermore, it’s possible the current surplus to the five-year average of 11%, or 261 Bcf, is gone by the end of the month.

Total working gas in storage as of January 29 stood at 2,689 Bcf, which is 42 Bcf higher than a year-ago levels and 198 Bcf above the five-year average, according to EIA.

We could see a choppy, two-sided trade this week until traders get some clarity about the forecast from February 15 until February 28. It is possible that the current rally ended on Friday and that buyers may have to regroup at lower levels. However, given the huge draw down in storage, the groundwork has been laid for higher prices throughout the summer and into the end of the year.