Natural Gas Price Fundamental Daily Forecast – Demand to Ease Next Week but Cold Forecast to Return March 3

Natural gas futures are trading lower shortly after the regular session opening and ahead of the release of the U.S. Energy Information Administration’s (EIA) weekly storage report at 15:30 GMT. The early selling pressure is a response to overnight weather data that shifted to warmer.

Traders know it’s cold outside, but that demand is taken care of by the spot market. Futures traders are looking 10-15 days in the future, and those forecasts are looking warmer. This is why the March and April futures contracts are having a hard time sustaining a rally.

Furthermore, traders have seen the estimates for today’s government storage report and have adjusted prices according. If the expected drawdown comes in higher than expectations, prices are likely to spike higher, but not necessarily trend higher for more than a few days. If the drawdown misses to the downside then prices could break sharply.

At 14:23 GMT, March natural gas futures are trading $3.161, down $0.058 or -1.80% and April natural gas is at $2.985, down $0.047 or -1.55%.

Notice the March futures contract is trading higher than the April futures contract. This reflects the strong short-term demand.

Short-Term Weather Outlook

According to NatGasWeather, the major weather models trended warmer overnight, lowering demand projections for late February through the first two days of March.

“Overall, the overnight data maintained strong demand through Sunday, then easing to moderate levels next week as the frigid Arctic cold pool retreats into northern Canada,” NatGasWeather said.

“A warm ridge will span from Texas to New York City next week through March 2, with comfortable highs of 50s and 70s” resulting in weaker national demand for this time frame.”

“However, much of the data teases cold air over Canada pushing more aggressively across the border March 3-5 for a return to strong national demand. Although, we caution the weather data has been inconsistent with the early March pattern, and there are ways it plays out colder than currently forecast.”

Energy Information Administration Weekly Storage Report

The EIA is projected to reveal a withdrawal potentially greater than 250 Bcf for the week-ending February 12, which would be the largest pull of the season so far, Natural Gas Intelligence (NGI) reported.

According to NGI, a Reuters poll of 18 analysts is calling for estimates ranging from 288 Bcf to 202 Bcf, with a median decrease of 250 Bcf. The Wall Street Journal estimates were in the same range, with a median of 251 Bcf decline. NGI’s model projects a 286 Bcf pull.

Daily Forecast

NatGasWeather said it expects another volatile day of trading in the natural gas market Thursday amid ongoing chaotic conditions in Texas caused by Arctic temperatures sweeping through the state.

“It’s difficult to know if the natural gas markets are looking to early March patterns or are focused on the current/recent Arctic blast,” the firm said.

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