Natural Gas Moves Higher After Larger-Than-Expected Inventory Draw

Key Insights

• Working gas in storage decreased by 87 Bcf from the previous week. 
• Stocks are 240 Bcf higher than last year at this time. 
• Natural gas tries to gain additional upside momentum after the release of the EIA report. 

On December 21, EIA released its Weekly Natural Gas Storage Report. The report indicated that working gas in storage declined by 87 Bcf from the previous week, compared to analyst consensus of -80 Bcf.

At current levels, stocks are 240 Bcf higher than last year at this time and 280 Bcf above the five-year average. The high level of stocks remains an important bearish catalyst for natural gas prices.

The report highlighted a larger-than-expected draw, which could provide some support to natural gas markets. However, it should be noted that the draw is significantly lower than the five-year average of -107 Bcf.

Weather forecasts remain a key problem for natural gas bulls. Put simply, the weather is too mild, which leads to low demand for natural gas. Current forecasts indicate that weather may be colder in January, but traders should expect that longer-term weather predictions will fluctuate widely as we more closer to the next month.

Natural gas prices showed a positive reaction to the EIA report, which is not surprising as natural gas suffered a strong pullback since early November and bulls cling to any positive catalyst. However, it remains to be seen whether natural gas will be able to develop sustainable upside momentum and settle above the nearest resistance at $2.60 – $2.65.

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