Natural Gas Price Fundamental Weekly Forecast – Will Bulls Betting on Late January Polar Vortex Be Disappointed?
Natural Gas futures closed higher last week, helped by a recovery in prices on Friday as traders reacted to mid-session weather reports calling for regional blasts of cold in key demand areas late in the month. The news was enough to scare some of the weaker shorts out of the market but forecasts calling for generally comfortable conditions across most regions of the Lower 48 during the third week of January helped to cap gains.
Last week, March natural gas futures settled at $2.696, up $0.040 or +1.51%.
US Energy Information Administration Weekly Storage Report
The EIA reported last Thursday that domestic supplies of natural gas declined by 134 billion cubic feet for the week-ended January 8. On average, the data were expected to show a drop of 123 billion cubic feet for the week, according to analysts polled by S&P Global Platts.
Total stocks now stand at 3.196 trillion cubic feet, up 126 billion cubic feet from a year ago, and 218 billion cubic feet above the five-year average, the government said.
Short-Term Weather Outlook
According to NatGasWeather for January 15-21, “A weather system with rain and snow will extend from the Great Lakes to the Southeast the next few days with highs of 30s to 50s for a minor bump in demand, although countered by mild conditions over the rest of the U.S. with highs of 40s to 70s. Frigid air with lows of -10s to 20s will arrive across the Rockies and Northern Plains next week, although more than countered by warm versus normal highs of 40s to 70s over the South and East.”
Weekly Forecast
Prices could trade rangebound this week because of generally comfortable weather conditions across most regions of the Lower 48. This could cap gains while strong demand for liquefied natural gas (LNG) provides the support.
Traders will be keeping an eye on the ever changing outlooks for the last week in January. According to Natural Gas Intelligence (NGI), the final week of January holds promise for intense cold settling in over the Northwest and Plains before moving east. This could result in several days of freezing temperatures over large swaths of the country.
“We view the January 26-29 period as one of the best chances this winter for cold to finally come through,” NatGasWeather said Friday.
If the prediction for a polar vortex – a cold snap that develops in the atmosphere above the North Pole and sends harsh blasts of freezing temperatures throughout the Northern Hemisphere – holds true then look for upward pressure on domestic gas prices.
If there is no polar blast of cold air then prices will retreat. However, I don’t see a test of the recent lows unless there is a significant drop in demand for LNG.
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This article was originally posted on FX Empire
