Natural Gas Price Fundamental Daily Forecast – EIA Expected to Report Well-Below Average Withdrawal

Natural gas futures are edging lower on Thursday shortly after the regular session opening. Volume is a little down as traders await the release of the government’s weekly storage report at 15:30 GMT. Traders are looking for a much-smaller-than-average withdrawal. Also weighing on prices is a number of forecasts calling for mild temperatures over the near-term and uncertainty over the longer-term outlook.

At 13:48 GMT, February natural gas is trading $2.216, down $0.015 or -0.70%.

Spot Market

Prices were lower in the spot market on Wednesday due to warmer-than-normal temperatures dominating the eastern half of the country over the short-run. Natural Gas Intelligence’s (NGI) Spot Gas National Average fell 5.5 cents to $2.035 yesterday.

Deferred Spreads Bearish

Natural Gas Intelligence also said the spread between the March and April contracts has narrowed considerably since the start of winter. This spread is often seen as a gauge of the market’s expectations for how tight supplies will be by the end of the heating season. On Wednesday, the March futures contract settled at a slight discount to April.

“That’s not good for the bulls,” Powerhouse President Elaine Levin told NGI. “It’s basically the market saying, ‘Look, we don’t need to incentivize any producer, anybody, to give us more gas, because we don’t think we’re going to be tight.”

U.S. Energy Information Administration Weekly Storage Report

Today’s EIA weekly storage report is expected to show a 51 Bcf withdrawal. This is well below the historical norms for the week-ended January 3.

Bloomberg is expecting a median pull of 52 Bcf, with estimates ranging from minus 46 Bcf to minus 73 Bcf. Reuters calls for a 53 Bcf withdrawal, based on a range of minus 41 Bcf to minus 73 Bcf. NGI is forecasting a 51 Bcf withdrawal.

NGI added, “Last year, EIA reported a 91 Bcf withdrawal for the week-ended January 4, 2019. NGI calculations using EIA historical data show a five-year average withdrawal of 169 Bcf. That includes a record-setting 359 Bcf pull recorded for the week-ended January 5, 2018. As of Wednesday, EIA had not published its calculations showing historical comparisons for storage weeks in 2020.

Daily Forecast

The technical picture is bearish, but promising. The main trend is down according to the daily swing chart. However, the closing price reversal bottom from January 3 is helping to form a support base.

A trade through $2.083 will negate the closing price reversal bottom and signal a resumption of the downtrend.

The main trend will change to up on a move through $2.351. This is highly unlikely, but a trade through $2.185 will change the minor trend to up. This could trigger a rally into $2.217 to $2.249.