Natural gas futures closed lower on Friday after counter-trend trader attempts to build a support base failed on the last day of the week. Mild temperatures, light heating demand and higher production weighed on prices as well as a steep drop in cash market prices. The government also reported another bearish miss in its weekly storage report.

On Friday, May natural gas futures settled at $2.636 down $0.067 or -2.48%.

Short-Term Weather Outlook

Temperatures across the U.S. were mostly mild to warm with highs of 40s to 60s across the northern U.S. and 70s and 80s across the southern U.S. Cooler exceptions occurred over the Rockies and Plains as a weather system brought heavy rain and snow.

“A fresh cold shot will push into the Great Lakes and Northeast this weekend with chilly lows of 10s to 30s for stronger demand, while the Plains storm weakens. A milder break with highs of 50s to 70s will set up over the eastern half of the U.S. next week ahead of another cold shot arriving into the Midwest,” NatGasWeather said.

US Energy Information Administration Weekly Storage Report

On Thursday, the Energy Information Administration (EIA) reported a withdrawal of 52 Bcf from natural gas storage for the week-ended March 5, a result notably shy of expectations set by analysts ahead of the report.

Stocks ended the period at 1793 Bcf, compared with the year-earlier of 2,050 Bcf and the five-year average of 1,934 Bcf.

Production Recovers

Analysts said that, over the last two weeks covered by the EIA Inventory reports, production recovered more notably than demand following the Arctic freeze in February, Natural Gas Intelligence (NGI) wrote.

“Production’s rapid recovery has been the big surprise for the market,” analyst Dan Myers of Gelber & Associates said on the Desk’s online energy platform Enelyst. “On the demand side, it appears to have taken longer to normalize than many folks thought.”

Steep Drop in Cash Prices

NGI’s Weekly Spot Gas National Average for the March 8-12 period fell 43.5 cents to $2.510.

Daily Forecast

The main trend is down according to the daily swing chart. The main trend will change to up on a move through $2.750. Taking out $2.615 will reaffirm the downtrend with $2.527 the next potential downside target.

The main range is $2.352 to $3.060. The market is currently testing its 50% to 61.8% retracement zone at $2.706 to $2.622. This zone is controlling the near-term direction of the May natural gas futures contract.

Holding between $2.706 and 2.622 will indicate trader indecision and possibly an early sign that momentum is getting ready to shift to the upside.