Natural gas prices surged early in the week in anticipation of a bullish weekly storage report, but the news was disappointing, triggering a sell-off from its highest level since December 4 and a lower close.
March Natural Gas futures settled at $2.939, down $0.054 or -1.80%.
According to the U.S. Energy Information Administration, natural gas storage in the U.S. fell by 183 billion cubic feet (bcf) in the week-ended January 12. This was below forecasts for a withdrawal of 201 bcf.
That compared with the previous week’s record decline of 359 bcf, which was the highest on record, a fall of 243 bcf a year earlier and a five-year average drop of 203 bcf.
Total natural gas in storage currently stands at 2.584 trillion cubic feet (tcf), according to the EIA. That figure is 368 bcf, or around 12.5%, lower than levels at this time a year ago and 362 bcf, or roughly 12.3%, below the five-year average for this time of year.
Last week’s price action suggests natural gas prices are likely to drift sideways to lower unless a lingering cold front re-emerges over the near-term.
Hedge fund buying has been supportive throughout the rally, but these investors are likely to take profits if the weather forecasts continue to call for mild temperatures. That will lead to lower demand for heating fuel.
The weekly chart pattern indicates the key resistance is a retracement zone at $2.962 to $3.063. Basically, a sustained move over $3.063 will be bullish and a sustained move under $2.962 will be bearish.
The latest weather forecasts suggest the natural gas market will be controlled by the sellers this week.
“The eastern and southern U.S. are expected to warm up this week as higher pressure builds in, easing demand from very strong levels, according to NatGasWeather.com. Demand for natural gas is expected to drop from high to moderate.