Nat Gas: Weather Forecast Improves

[dan_s]

Nat Gas futures started the week in negative territory but over the last few hours it has been able to claw its way back into positive territory as the latest NOAA forecast is less bearish than the previous one. Sunday's NOAA temperature forecast for the six to ten day period did not deviate much from the previous several forecasts calling for very warm temperatures for most of the eastern half of the US. However, the eight to fourteen day forecast is noticeably less bearish than the previous day's forecasts in that the area for above normal temperatures is now forecast for only about 20% of the country along the upper east coast.

The market has picked up on this change in forecasts and has moved back into positive territory. Once again I do not view this as a trend change but rather a bit of short covering by the weak shorts that are in the market. Keep in mind this week's inventory report should be bearish after last week's warmer than normal weather along a major portion of the eastern half of the US.

The spot Nat Gas futures price remains embedded in the $3.20/mmbtu to $3.50/mmbtu trading range that has been in play since the middle of December of 2012. Over a shorter timeframe the spot futures market has traded in an even tighter range over the last six trading session of between $3.40/mmbtu to $3.21/mmbtu. Of interest of those six trading session three were up days and three were down days. The Nat Gas market is searching for strong directional guidance. This time of the year that guidance will only come from the actual temperatures and/or the short term weather forecast. At the moment neither support a very strong move in either direction.

This week the EIA will release its inventory on its normal schedule and time... Thursday February 7th at 10:30 AM. This week I am projecting an average withdrawal of 135 BCF from inventory.