Natural Gas Price Fundamental Weekly Forecast – Traders Eyeing Feb 6-11 for Next Cold Shot

Natural gas futures closed sharply higher last week, bolstered by skyrocketing cash prices as the U.S. braced for a period of intense cold temperatures across key demand areas in the Midwest and the East Coast. Robust demand for liquefied natural gas (LNG) also supported the market. Perhaps capping gains, however, was weaker-than-expected government storage data for the week-ending January 22.

Last week, March natural gas futures settled at $2.564, up $0.108 or +4.40%.

Cash Prices Soar

Natural Gas Intelligence’s (NGI) Weekly Spot Gas National Average for the January 25-28 trading period spiked 48.5 cents to $3.095, lifted by a weeklong rally. The trading week consisted of four trading days for January gas delivery, ending Thursday, because Friday’s trading was for gas delivered on Monday, February 1.

NGI also said prices in the Northeast, where low temperatures hovered in the single digits much of the week, led the charge.

US Energy Information Administration Weekly Storage Report

Prices fell sharply following the release of a bearish government storage report on Thursday. The U.S. Energy Information Administration (EIA) reported a withdrawal of 128 Bcf natural gas from storage for the week-ended January 22. The print was notably lighter than a week earlier and came in well below the mid-point of analysts’ estimates.

Ahead of the government storage data, NGI reported that Bespoke anticipated the EIA to report a draw of 140 Bcf for the week-ended January 22.

Short-Term Weather Outlook

According to NatGasWeather for January 29 to February 4, “A strong storm continues to bring rain and snow across the West with cool highs of 30s to 50s. Chilly highs of 10s to 40s covers the northern half of the U.S. for strong national demand, although would be more impressive if the southern U.S. weren’t mild with highs of 50s to 70s. National demand will ease late this weekend and next week as high pressure builds across the central and southern U.S. with highs of 40s to 70s but still with slightly cool weather systems over the West and East with highs of 30s to 50s.”

Weekly Forecast

On Friday NatGasWeather wrote, “The big question going into the weekend break is how much cold air arrives into western and central U.S. February 6-11 and then how much spreads eastward. The GFS had been a bit colder with the set up than the more recent European model that holds a warm ridge over the southern and eastern U.S. stronger to block cold air from arriving. The GFS is more aggressive, pushing cold air eastward.”

Looking ahead, analysts at Tudor, Pickering, Holt & Co. (TPH) said forecasts through the first two weeks of February “look quite constructive” as a “deep cold spell” looks to move across the Northern Plains and into the Midwest.

“The largest unknown right now seems to be just how far east the cold will extend and if major populations in Chicago and he East Coast will feel the frost,” the TPH analysts said. If they do, the analysts suggested, heating demand could prove strong well into February, providing continued support for cash prices.

The key area that buyers have to overcome in order to generate a potential major breakout to the upside is $2.794 to $2.918.

Holding under $2.918 is likely to lead to more rangebound trading.