Natural gas futures are trading nearly flat on Thursday as investors await the latest storage report from the government at 15:30 GMT and the midday forecasts that should offer more insight into the strength of the so-called “Polar Vortex” that could reach key U.S. demand areas later in the month.
Capping gains are uncertainty over whether the extremely cold temperatures will even reach the United States. Helping to underpin prices are calls for strong liquefied natural gas (LNG) due to robust demand from Europe and Asia.
At 14:21 GMT, March natural gas futures are trading $2.694, up $0.005 or +0.19%.
Near-Term Weather Outlook
NatGasWeather observed mixed trends in the overnight data, with heating demand gains in the Global Forecast System countered by demand losses in the European data.
“Overall, both maintained a rather bearish pattern through January 21 with only modest cold shots into the U.S.,” the firm said. “However, both were rather chilly across the northern U.S. January 23-28, but this time the GFS more so than the European.”
“The overnight European does show that if frigid air over Canada and the western U.S. January 23-28 were to shift just slightly further westward, the pattern would trend rapidly warmer over the important Midwest and eastern U.S., NatGasWeather said. “As such, it’s critical cold comes through” for this period, “but to our view, the risk is there could be warmer trends in time.”
US Energy Information Administration Weekly Storage Report
According to Natural Gas Intelligence (NGI), “Traders and analysts are predicting another triple-digit withdrawal from U.S. natural gas stocks in the latest EIA storage report, scheduled for 15:30 GMT.”
Ahead of the report, a Bloomberg survey found estimates ranging from withdrawals of 120 Bcf to 141 Bcf, with a median of a 129 Bcf decrease. NGI modeled 130 Bcf withdrawal for this week’s report, which covers the week-ending January 8. Energy Aspects predicts a 128 Bcf withdrawal.
A year ago, the EIA recorded a 91 Bcf withdrawal for the comparable year-ago period, while the five-year average withdrawal is 161 Bcf, according to the agency.
Unless there is a blowout miss in the EIA report, most traders will be focusing on the midday weather forecasts and particularly the outlook for January 23-28.
Technically, trader reaction to $2.698 will determine the short-term direction of the market. A move over $2.698 could drive prices into $2.794 to $2.835. A move under $2.698 will target $2.552 to $2.485.
The longer-term direction of natural gas will be determined by trader reaction to $2.794 to $2.918. The latter is a potential trigger point for an acceleration to the upside.