Natural Gas Price Fundamental Weekly Forecast – Bullish Traders May Be Betting on Last Year’s Late Cold Pattern Repeating
Natural gas futures consolidated inside a $0.165 range last week, helped by a price surge on Friday. The price action suggests short-term bottoming action may be taking place. The market gapped higher last Monday but those gains eroded throughout the week. Nonetheless, the futures contract finished higher 3 out of 5 sessions, which suggests aggressive buyers may be defending the recent bottom at $2.565.
For the week, April natural gas settled at $2.610, up $0.006 or +0.23%.
Mild temperatures from February 11 to February 15 kept a lid on prices, however, sentiment seemed to shift on Friday in anticipation of the first of a series of cold blasts set to arrive February 16 to February 17.
Traders had to deal with a split weather pattern in the country. Demand was strongest in the Northeast with temperatures forecast to drop as low as the minus 10s to 20s. However, in the West, cash prices plunged 30 cents on expectations of lower demand.
Short-Term Weather Outlook
According to NatGasWeather for February 15-21, “Mild conditions with highs of 40s and 50s will last for one more day across the East ahead of a cold front currently sweeping across the Midwest/Great Lakes where lows behind the front will drop into the -0s to 20s. The West will be cool to cold with areas of heavy rain and snow. The southern US will be warm with highs of 60s to 80s, although cooling Sunday-Tuesday with lows of teens to 30s. A stronger cold blast will push across the central and northern US Monday-Thursday with lows of -10s to 20s North and 20s to 40s over the South. Late next week, mild high pressure will build across the southern and eastern US with highs of 50s to 80s returning, warmest over the South/SE. Overall, national demand will increase to high-very high this weekend through much of next week.”
Mid-Term Weather Outlook
“The latest weather data was pretty stable in showing cold lasting through the middle of the week, but then milder as strong high pressure was forecast to send daytime highs back into the 50s to 80s. The warmest weather was expected over the Southeast and Mid-Atlantic Coast and where demand just won’t be strong enough to impress, even though it’s expected to be quite cold over much of the rest of the country”, according to NatGasWeather.
“Most of the weather data favors subfreezing air pushing back across the Ohio Valley and Northeast February 29 to March 3 in what currently appears like a plenty cold enough pattern with stronger-than-normal demand. But will it hold in the weather data through the weekend?” the firm said.
Weekly Storage Report
On Thursday, the U.S. Energy Information Administration reported that domestic supplies of natural gas fell by 78 billion cubic feet for the week ended February 8. That was pretty close to the consensus estimate of 80 Bcf. Total stocks now stand at 1.882 trillion cubic feet, down 30 billion cubic feet from a year ago and 333 billion below the five-year average, the government report showed.
Weekly Forecast
Weather will be at the forefront this week as both the American and European weather models continued to trend colder as of Friday afternoon. Prices are likely to remain underpinned as long as these two forecasts remain in sync. However, the trade could still be limited to the upside due to the lack of buyers. Furthermore, it is possible that the market sees a choppy, two-sided trade throughout the week, but with a slight bias to the upside.
Traders are watching the current weather patterns because they be following the patterns from last year, where extremely cold temperatures hit the markets in late March and early April.
Bullish traders may increase bets on this pattern repeating. In this case, prices are likely to hold in a range or rally until they are proven otherwise. Bearish traders are betting that last year’s pattern will not repeat. They may have the selling power strong enough to drive prices through $2.50 for the first time in 30 months. Prices could plunge if this occurs.
This article was originally posted on FX Empire
