Natural gas futures finished higher after gapping on the weekly chart. The rally was fueled early in the week by forecasts calling for fewer warmer-than-average days, but prices began to retreat after cold was put back into the forecast and the government storage report fell short of expectations.
The rally also fell short of the last main top at $2.750, but the support was strong enough to prevent a return to the most recent bottom at $2.268 hit the week-ending December 31. Helping to underpin prices was strong U.S. liquefied natural gas (LNG) exports and the potential for colder domestic temperatures later in the month and maybe into early February.
Last week, March Natural Gas futures settled at $2.656, up $0.130 or +5.15%.
US Energy Information Administration Weekly Storage Report
U.S. natural gas in storage fell by 130 Bcf last week, according to the EIA. Storage inventories decreased to 3.333 Trillion Cubic Feet (Tcf) for the week-ended January 1. The withdrawal was less than an S&P Global Platts survey of analysts calling for a 13 Bcf pull. Responses to the survey ranged from a 121 to 157 Bcf withdrawal.
The pull was much stronger than the 48 Bcf draw reported during the same week last year as well as the five-year average of 115 Bcf, according to EIA data.
Short-Term Weather Outlook
According to NatGasWeather for January 8-14, “Weather systems with rain & snow will impact the Northwest and Southeast today, although mild with highs of 30s to 50s. Cooler air will spread across much of the U.S. this weekend with highs of 20s to 40s across the northern U.S. and 40s to 60s across the southern U.S., increasing national demand to moderate levels.
However, above normal temperatures will return across much of the U.S. mid-next week with highs of 30s to 50s across the northern U.S. and 50s to 70s across the southern U.S., even though still unsettled over the South and Southeast. Overall, moderate demand this weekend, then back to low next week.”
We’re expecting another volatile opening on Monday amid changing weather forecasts over the weekend. The primary focus for traders over the weekend and the news that will likely set the tone early this week is the January 18-22 weather forecast.
The main trend is down according to the weekly swing chart. A trade through $2.750 will change the main trend to up.
The main range is $3.320 to $2.268. Its retracement zone at $2.794 to $2.918 is the first upside target. This zone is controlling the near-term direction of the market.
The minor range is $2.750 to $2.268. Its 50% level at $2.509 is potential support. A pullback into this level could attract aggressive counter-trend buyers. Firm demand for LNG will be one reason supporting this move. If $2.509 fails as support then look for prices to possibly extend into $2.268.
For a look at all of today’s economic events, check out our economic calendar.