The U.S. Energy Information Administration (EIA) will release its Weekly Gas Storage Report on Thursday, March 5, 2015 for the week ending February 27, 2015.
Here are five things every trader and investor of natural gas needs to know:
1. The Basics
Report Date/Time: Thursday, March 5, 2015 at 10:30am EST
Report Link: http://ir.eia.gov/ngs/ngs.html
2. The Estimates and Historical Numbers
Estimate: -225 Bcf
Last Year’s Withdrawal: -152 Bcf
Five Year Average Withdrawal: -121 Bcf
Full Historical Data
The price action of natural gas following the U.S. Energy Information Administration’s (EIA) Weekly Gas Storage Report usually reacts strongly to whether or not the report beat industry analysts’ estimates. As an observation, price action following recent reports has completely ignored last year’s withdrawal figures as well as the five year average for the same reporting period.
While a beat of estimates doesn’t necessarily mean higher prices, recent price action has shown that a miss will usually result in a sell-off. With injection season looming just a few weeks away, a miss is likely to only further increase any selling pressure of the commodity.
3. The History
Natural gas futures have closed lower after 6 of the last 9 Weekly Gas Storage Reports (previous day’s closing price to closing settlement price on report day).
4. The Price Action If Estimates Are Missed
If estimates are missed, the commodity is likely to trade in a similar pattern to other sessions following the report.
Typically, the price falls fast (milliseconds) to a recent support level. In the case of this week’s report, this first support level is likely to be $2.68 per mmBtu.
The commodity then trades sideways for 30 to 60 minutes. This period is usually a bull trap as many traders and investors believe that the bottom is in after the report.
Prices then fall to a secondary level of support in which heavy selling pressure continues, panic selling ensues, and the commodity appears to have taken its last breath. Traders (scalpers) feast on the fear and can usually capitalize on a small bounce of a few cents by the end of the trading session.
For traders and investors looking to re-enter or take a position in the commodity, late Friday to mid Monday are usually periods when selling pressure lessens and a bottoming or small recovery forms.
5. A 200+ Withdrawal Still Matters Despite a Miss or Beat
Despite a miss or beat of analysts’ estimates, a large withdrawal is still very significant because it will only lower the end of season storage number prior to injection season. A withdrawal of this size was unexpected in January estimates for end of year storage, leading many analysts to lower their end of year estimates.
As is the case on any Thursday with natural gas, traders and investors should expect significant price action with increased volume. At the same time, such price action can be very profitable (provided of course that you are on the right side of the trade).
Enjoy the ride.
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This commentary is an opinion piece by the author based on his own analysis. It is not a recommendation to buy or sell any commodity. Read our full disclaimer here.