Natural Gas Price Fundamental Weekly Forecast – Roller Coaster Temperatures Likely to Fuel Two-Sided Trade

Natural gas futures closed higher last week as the U.S. natural gas storage withdrawal season started  one week later than normal with a below average draw for the week-ended November 20 as the Henry Hub winter strip showed slight declines with demand somewhat muted for the week in progress, S&P Global Platts reported.

Traders were also influenced by forecasts calling for milder temperatures throughout the country over the weekend. Volume was also light due to the Thanksgiving holiday. Lower weekly cash prices also weighed on the nearby futures contract.

Last week, January natural gas futures settled at $2.843, up $0.073 or +2.64%.

US Energy Information Administration Weekly Storage Report

Working gas in storage was 3,940 Bcf as of Friday, November 20, 2020, according to EIA estimates. This represents a net decrease of 18 Bcf from the previous week. Stocks were 322 Bcf higher than last year at this time and 250 Bcf above the five-year average of 3,690 Bcf. At 3,940 Bcf, total working gas is within the five-year historical range.

Short-Term Weather Outlook

According to NatGasWeather for November 30 to December 5, “A weather system with rain and snow will track across the South and East the next several days with chilly lows of 10s-30s and highs of 30s to 50s for a bump in national demand.

A second cold shot will push into the interior West and central US/Plains Wednesday-Friday with frosty lows of 0s to 30s, although countered by the East warming back into the 40s to 60s. Most of the U.S. will warm above normal next weekend besides the slightly cool Southeast and up the Mid-Atlantic Coast where a weather system will bring showers.

Overall, national demand will be increasing to moderate-high in the coming days, then back to low late this week and next weekend.”

Weekly Forecast

We are anticipating a choppy-sided trade this week as the weather is expected to continue to control the price action. Early in the week, the market is likely to be underpinned by a slight increase in national demand, but that is likely to be short-lived because of an expected drop in demand to low by next week-end.

Once again, the prediction of cold temperatures will not be enough to sustain a rally. Bullish traders will be looking at the duration of the cold. They want to see forecasts calling for “Cold Pressure Domes” or “Polar Vortexes”. Everyone knows it gets cold in the winter, what bullish traders want to see is lingering cold not just cold shots.

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