Natural Gas

Natural Gas Price Fundamental Daily Forecast – Under Pressure Despite Calls for Further Storage Deficits

Natural gas futures are edging lower shortly after the New York opening on Wednesday amid increasing supply after last week’s Arctic freeze in Texas temporarily shut down production. Weather predictions calling for mostly warmer temperatures in the weeks ahead also pressured prices. Also weighing on prices were declines in spot prices. Natural Gas Intelligence’s (NGI) Spot Gas National Average slipped 9.5 cents to $2.775.

At 13:28 GMT, April natural gas futures are trading $2.829, down $0.028 or -0.98%.

Production Bouncing Back

NGI reported that though production impacts from the recent cold blast are expected to linger for a while, Wood Mackenzie said output is bouncing back. Furthermore, the firm has seen some revisions that brought last week’s nadirs back above the 70 Bcf mark.

Recent production estimates – subject to revisions – have shown Lower 48 numbers back above 80 Bcf, which is roughly around 90% of the overall January average. Recoveries are varying regionally, with areas like the Permian Basin still in the 77-87% recovered range, according to Wood Mackenzie analyst Joseph Bernardi. Texas production, meanwhile, has been in the 85-91% range overall in the last few days, he said.

Short-Term Weather Outlook

According to NatGasWeather for February 23-30:  A weather system with rain and snow will track across the Ohio Valley and Northeast today with slightly cool highs of 30s to 40s. A cold front will dive down the Plains late in the week with showers, while a second system sweeps across the Midwest, Great Lakes, and Northeast Thursday-Saturday with rain, snow, and chilly lows of 0s to 30s for stronger national demand. Warm high pressure will build across the central southern, and eastern U.S. late this weekend into early next week with highs of 50s to 70s for a return to light national demand.”

Early Look at EIA Weekly Storage Report

The rapid pace of storage draws is poised to accelerate this week when the Energy Information Administration (EIA) issues its weekly inventory report. Analysts’ early estimates are calling for a withdrawal of greater than 300 Bcf, which would be the second largest pull on record if it were to materialize.

“Most important, the steep draw is set to finally flip the surplus to the five-year average to deficit, one that is seen quickly ballooning in the weeks ahead,” NGI wrote.

Energy Aspects, whose preliminary estimate for this week’s storage draw is an astounding 365 Bcf, said the prolonged freeze has put February on track for a drawdown of 890 Bcf.

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

Published by

James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.