Natural Gas Price Fundamental Daily Forecast – Weather, Storage Concerns Continue to Weigh on Prices

Natural gas futures are edging higher on Friday shortly before the regular session opening. The price action looks to be driven by profit-taking and position-squaring ahead of the weekend after yesterdays bearish government storage report and weather forecasts calling for milder temperatures. Traders are hoping to dampen the strong downside bias after the market closed lower for the 10th day out of 12.

At 10:42 GMT, May natural gas futures are trading $2.529, up $0.018 or +0.72%.

The government posted a third straight bearish storage report on Thursday that increased concerns over rising supply over the spring shoulder season.

Both the domestic and European weather models “held moderate demand late this week, then very light demand late this weekend through next week,” NatGasWeather said Thursday. For the final week of March, the firm added, “most of the U.S. will be mild to warm with highs of 40s to 60s” over the north “and 60s to 80s across the southern U.S. for light to very light national demand.”

Energy Information Administration Weekly Storage Report

The EIA reported on Thursday that domestic supplies of natural gas declined by 11 billion cubic feet for the week-ended March 12. On average, the report was expected to show a decline of 17 billion cubic feet for the period, according to analysts polled by S&P Global Platts.

Natural Gas Intelligence (NGI) reported ahead of the EIA report, Bespokes model estimated a pull from inventories of 10 Bcf for the week ended March 12.

A Bloomberg survey found withdrawal estimates ranging from 14 Bcf to 20 Bcf and a median of 18 Bcf. The median forecast in a Reuters poll meanwhile, landed at a pull of 16 Bcf, with draw estimates spanning 1 Bcf to 29 Bcf.

The Wall Street Journals weekly survey produced withdrawal estimates that ranged from 14 Bcf to 29 Bcf, with a 22 Bcf average decrease.

NGI estimated a 14 Bcf pull for the latest week.

Total stocks now stand at 1.782 trillion cubic feet, down 253 billion cubic feet from a year ago and 93 billion cubic feet below the five-year average, the government said.

Short-Term Weather Outlook

According to NatGasWeather for March 18-24, A weather system will bring areas of rain to the east-central/eastern U.S. today and Friday with highs of 30s to 50s. It will be mild to warm over the rest of the country with highs of 40s to 60s across the Midwest and Great Lakes and 60s to lower 80s from South Texas to the Southeast.

A colder weather system will track into the Northeast Friday while merging with the east-central U.S. system for a bump in national demand. However, light national demand is expected late this weekend and next week as high pressure rules the southern and eastern ½ of the country with comfortable highs of 50-80s, while slightly cool and showery over the West with highs of 40s to 60s. Overall, moderate national demand this week, then light late this weekend into next week.

Daily Forecast

Although the market is trading a little higher early Friday, the move is likely being fueled by oversold technical indicators. The charts indicate that further downside pressure is likely especially with traders already looking forward to another modest pull from inventories in next weeks government storage report. Furthermore, some analysts are predicting that this may be the last withdrawal before gas in storage starts to rise again.

Perhaps limiting losses is strong liquefied natural gas (LNG) demand that rose to 11.7 Bcf on Thursday. NGI reported that LNG feed gas volumes have hovered close to or above the bullish 11 Bcf threshold for the past week