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Natural gas futures started the new week with a gap to the downside as new weather forecasts revealed the warming trend will continue to weigh on demand. The early price action also suggests that traders are anticipating another anemic storage report from the U.S. government.
Last week, May natural gas futures settled at $2.636, down $0.103 or -3.76%.
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.
Weekly Weather Outlook
According to NatGasWeather for March 15 to March 21, “A strong weather system over the Rockies and Plains continues to bring heavy rain and snow, although rather mild with highs of 30s to 50s. A colder system over the Northeast will bring lows of 10s to 30s and highs of 30s and 40s Monday through Tuesday, while a third system brings rain and snow to the West Coast.
The combination of these systems will lead to strong national demand Monday through Tuesday. The western U.S. weather system will track into the Rockies and Plains mid-week, although warming will shift over the South and East with highs of 50s to 70s. Overall, moderate national demand this week.”
Weekly Weather Forecast
With most traders looking 10 to 15 days into the future, last weekend’s cooler temperatures and the cooler weather to start the week are expected to be ignored. Instead, traders are already looking at next week’s forecasts calling for warm and comfortable temperatures.
This is expected to result in expectations for a net national demand loss in both weeks, according to EBW Analytics Group.
Natural Gas Intelligence (NGI) wrote, EBW also noted that production this month has recovered from hits endured during the infamous Texas freeze in February as well as the completion of pipeline maintenance work in the Northeast. Yet, EBW added power demand in Texas and neighboring states has lagged the production recovery. Several refineries have yet to resume full operations, resulting in looser supply/demand balances and hampering prices.
Looking ahead to this week’s Energy Information Administration (EIA) report, analysts now expect a paltry withdrawal with the next government storage release on Thursday.
Resistance comes in this week at $2.622 and $2.706. Support is down at $2.527 which indicates the early selling could continue. Expect an even steeper decline if this level fails.