Natural Gas Price Fundamental Weekly Forecast – Record Setting Arctic Blast Losing Grip, but Cold Returns Next Week-End

Natural gas prices finished lower last week as traders continued to liquidate long positions ahead of the lifting of the polar vortex over the week-end. The news was putting pressure on the market at nearly every major cash pricing point. Natural Gas Intelligence said, “Most declines were in the neighborhood of 30 to 80 cents.”

Last week, March natural gas finished at $2.734, down $0.338 or -11.00%.

Storage Withdrawal Smaller Than Expected

On Thursday, the U.S. Energy Information Administration (EIA) reported that domestic supplies of natural gas dropped by 173 billion cubic feet for the week-ended January 25. Analysts were looking for a decline of 180 billion cubic feet with some guesses as high as 197 billion cubic feet. The five-year average for the same week was a fall of 150 billion cubic feet.

The EIA data also showed that total stocks now stand at 2.197 trillion cubic feet, down 14 billion cubic feet from a year ago, but 328 billion below the five-year average.

Break from Extremely Cold Temperatures

According to NatGasWeather for February 1 to February 7, “Dangerous polar air will lose its grip across the northern US today but still quite chilly with highs of 0s to 30s. Strong warming will follow this weekend into next week with highs of 40s and 50s across the Great Lakes to Northeast, with 60s and 70s over the southern US, locally 80s. Colder air will return across the Midwest and Northeast late next week. The West and Plains will see increasing showers and mostly cool to cold. Overall, national demand will be easing to low this weekend through the middle of next week.

Weekly Forecast

The drop in cash market prices suggests the futures markets may be vulnerable to a gap lower opening on Monday. There isn’t much support between the recent bottom at $2.771 and the psychological $2.500 level.

With another cold blast predicted February 8 to 14, prices could stabilize soon after the opening as the details of the duration of this polar blast are revealed. Any rally is likely to be short-lived, however, with sellers clearly in control.