Natural Gas Price Fundamental Daily Forecast – Uncertainty Over Cold Trends after Feb 15 Capping Gains

Natural gas futures are trading steady to lower shortly after the cash market opening on Wednesday, following a dramatic closing price reversal top the previous session. Although frigid air is expected to linger over much of the high heating demand eastern United States through at least the first half of the month, the current price action suggests that this news has been fully-priced into the market.

At 14:02 GMT, March natural gas is trading $2.826, down $0.019 or -0.67%.
Natural Gas Intelligence (NGI) is saying that weather models made huge changes to the colder side over the weekend and on Tuesday, continued updates added demand to the 15-day outlook. However, the latest run in the European weather model erased a decent chunk of projected demand.

On Tuesday, the European model gained 23 heating degree days (HDD) for Saturday (February 6) through February 16. The midday American Global Forecast System, meanwhile, added another 5 HDDs, with the model showing a frigid pattern in across much of the northern half of the country during the time period, including bouts of subfreezing air into Texas and the South, according to NatGasWeather.

“With the supply/demand balance already tight, the natural gas markets have been impatiently waiting for sustained winter cold to arrive, and this is the first time the past two winters it’s likely to finally come through,” NatGasWeather said.

Prices retreated on Tuesday after the European model “wasn’t quite as extreme”, according to NatGasWeather. It did hold much colder trends from Monday (Feb. 7) through Feb. 9. It also showed colder trends for Feb 10-14, but the amount of cold after Feb 15 is still being debated.

Looking Ahead to Thursday’s EIA Storage Report
Market expectations for the next Energy Information Administration (EIA) storage report are for a withdrawal slightly above 190 Bcf.

“From a weather-adjusted perspective, anything less than a 200 Bcf withdrawal would be modestly bearish year/year,” Mobius Risk Group said. “However, combined with the upcoming cold shot, it drive down end-of-March inventory estimates to a level which has those with short interest reconsidering their exposure.”
Daily Forecast
Traders are waiting for today’s midday forecasts before making their next major trading decision. This is because of the uncertainly around the amount of cold to expect after February 15.

March natural gas is currently testing a key retracement zone at $2.794 to $2.918. Trader reaction to this area will likely set the tone the rest of the week.