Natural Gas Price Fundamental Daily Forecast – Prices Plunge on Huge Shift Toward Milder Temperature Trends

Natural gas futures are plunging on Thursday, shortly before the release of the U.S. Energy information Administration’s weekly storage report. The move came as a surprise to some who were banking on the return of cold weather over the short-term and firmer cash prices to provide support. The steep drop is also likely to offset a bullish EIA report because it shouldn’t really matter much to traders what happened last week.

At 15:17 GMT, April natural gas is trading $1.752, down $0.084 or -4.63%.

Natural Gas Intelligence (NGI) said early Thursday that a large milder shift in one of the major weather models overnight is responsible for sending natural gas prices tumbling on Thursday.

NGI further reported that the European model underwent “big milder trends” overnight, shedding 17 heating degree days (HDD) compared to its Wednesday afternoon run and 27 HDD versus 24 hours prior, according to NatGasWeather.

The model showed “not nearly as much cold air into the northern U.S. March 5-8 by seeing a weather system over Southern Canada only providing a minor glancing blow,” the forecaster said. Based on the warmer shift overnight, “the natural gas markets are going to view weather patterns as being warm/bearish after the current cold shot sweeping across the northern and eastern U.S. exits Saturday.

U.S. Energy Information Administration Weekly Storage report

On Thursday, the EIA reported that domestic supplies of natural gas fell by 143 for the week-ending February 21. Total stocks now stand at 2,200 trillion cubic feet, up 637 billion cubic feet from a year ago, and 179 billion cubic feet above the five-year average, the government said.

Going into the report, traders were looking for a larger-than-average withdrawal for the week-ending February 21.

A Bloomberg survey predicted withdrawals ranging from 145 Bcf to 165 Bcf, with a median of 156 Bcf. Polls by the Wall Street Journal and Reuters produced similar results, while NGI’s model projected a pull of 152 Bcf.

The EIA recorded a 167 Bcf draw for the similar week last year, while the five-year average withdrawal stands at 122 Bcf.

Daily Forecast

Traders pressed prices lower following the EIA’s weekly storage report since it came in below the estimates. Furthermore, given the bearish shift in the forecast, it would’ve taken a huge draw to trigger any kind of a short-covering rally.