Natural Gas Price Fundamental Daily Forecast – Weather Rally Weakens Ahead of Potentially Bearish EIA Report

Natural gas futures are trading lower on Thursday as traders brace for a potentially bearish government storage report. Perhaps limiting losses is a forecast showing that frigid air may finally seep into the United States over keep demand areas January 1 – 5.

At 13:36 GMT, March natural gas futures are trading $3.617, down $0.096 or -2.59%.

Energy Crisis in Europe Results in Record Prices, Strong US LNG Demand

Natural Gas Intelligence (NGI) is reporting the new U.S. Liquefied Natural Gas (LNG) capacity comes amid the ongoing energy crisis in Europe, which has resulted in record prices for the super-chilled fuel. The February Title Transfer Facility contract has rocketed to close to $60 this week, with forecasts pointing to colder-than-normal temperatures lasting through the end of the year, along with a considerable amount of snowfall.

Additionally, near-record export demand continues as Sabine Pass amps up its sixth production unit. NGI data showed feed gas volumes slightly above 13 Bcf on Wednesday, a level they have more or less held at since Sunday.

Short-Term Weather

According to NatGasWeather for December 23-29, “National demand will remain light the next 7-days as high pressure rules over most of the central, southern, and eastern U.S. with highs of 40s to 70s.

Colder exceptions continue across the West and Northern Plains as chilly weather systems bring rain, snow and frosty lows of -10 to 30s, highs of 10s-40s.

NatGasWeathers’s Global Forecast System forecasts frosty air spreading out of the northern Plains across the northern part of the country January 1-5. It also added that the European Centre (EC) model is much colder with the upcoming blast. A slight shift north/south with the bitterly cold pool over South Canada during the period could result in a huge price response. “To our view, it’s important the EC doesn’t back off on cold January 1-5, or it could disappoint.”

US Energy Information Administration Weekly Storage Report

Today’s EIA weekly storage report, due to be released at 15:30 GMT, is expected to show a smaller-than-normal withdrawal from underground storage.

According to NGI, a Bloomberg survey produced a range of withdrawals from 50 Bcf to 62 Bcf, with a median draw of 54 Bcf. A Wall Street Journal poll had the same range of estimates, with an average pull of 57 Bcf. Likewise, a Reuters poll with the same range produced a median draw of 56 Bcf. NGI’s model predicted a pull of 53 Bcf.

A year earlier, utilities withdrew 147 Bcf from storage, while the five-year average is a 153 Bcf reduction in supplies, according to EIA.

Daily Forecast

We’re seeing a rangebound trade with a developing downside bias. Taking out $3.492 will signal a resumption of the downtrend with $3.430 the next downside target. This is a potential trigger point for an acceleration into $3.186.

On the upside, overtaking $3.864 will give the market its best chance to perhaps spike to $4.378 over the next two weeks.

Traders will be monitoring the midday forecast for any changes to the January 1-5 weather report. This could produce a huge late session rally, or break.