Natural Gas Price Fundamental Daily Forecast – Friendly Tone on Slight Shift in Forecasts Ahead of EIA Report

Natural gas futures are trading higher on Thursday after clawing back earlier losses. We could be looking at position-squaring ahead of the government’s weekly storage report, due to be released at 15:30 GMT, or short-covering after the latest weather forecasts showed the warmer temperatures expected later this month may be less intense than initially predicted. Natural Gas Intelligence (NGI) also reported that a tight supply/demand backdrop added support.

At 12:25 GMT, January natural gas futures are trading $2.464, up $0.022 or +0.90%.

 Short-Term Weather Outlook

According to NatGasWeather for December 10 to December 16, “Most of the U.S. will be warmer than normal the next few days with highs of 40s to 70s, warmest over Texas, the Plains, and South. The exception will be the West as weather systems bring rain and snow with highs of 30s to 60s, then tracking into the central U.S. this weekend. However, at the same time, the eastern ½ of the U.S. will become much warmer versus normal with highs of 40s to 70s to keep national demand light. Cooler air will finally reach the East early next week with lows of 10s to 30s for a bump in national demand. Overall, national demand will be low until increasing moderate-high early next week.”

Mixed Mid-Term Forecast Fueling Light Short-Covering

NGI is reporting that the middle of December could bring about a brief period of more normal winter weather, Wednesday’s weather models provided some confirmation. Still, rather than outright negating the warm outlook, the changes in the atmospheric pattern reduced the intensity of the warm forecast.

“That is not something we see on the horizon yet, but…we will be watching for any shifts in the orientation of tropical forcing that could change that narrative late in the month,” Bespoke said.

The European model’s afternoon run on Wednesday was not quite as supportive.

US Energy Information Administration Weekly Storage Report

NGI is reporting a Bloomberg survey of six analysts had withdrawal estimates ranging from 84 Bcf to 99 Bcf, with a median draw of 86 Bcf. A Wall Street Journal poll of 14 market participants showed a withdrawal as low as 82 Bcf, with an 89 Bcf average. Reuters’ survey produced even lower estimates, down to a draw of 70 Bcf, while NGI projected an 84 Bcf pull.

Last year, the Energy Information Administration (EIA) recorded a 57 Bcf pull from storage inventories in the similar week, while the five-year average stands at 61 Bcf. A meager 1 Bcf was reported last week by the EIA.

Daily Forecast

The market could be trying to form a support base between $2.368 and $2.524. Taking out $2.368 will signal the resumption of the downtrend. A trade through $2.524 will change the minor trend to up and shift momentum to the upside. If this move is able to create enough upside momentum then look for the rally to possibly extend over the near-term into $2.685. Of course, it all depends on the weather forecasts that remain bearish, but could change slightly with the release of the midday forecasts.

For a look at all of today’s economic events, check out our economic calendar.