After Bullish Storage Report, Can the Momentum Continue for Natural Gas?

After Bullish Storage Report, Can the Momentum Continue for Natural Gas?

By Tim Silas | Reporter and Columnist

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The U.S. Energy Information Administration (EIA) reported on Thursday in its Weekly Gas Storage Report that storage levels declined by -228 Bcf for the week ending February 27. The withdrawal beat industry analysts’ estimates of -225 Bcf.

But now many natural gas traders and investors are asking: can the momentum continue?

Technicals

In a small rally leading up to the release of the report, natural gas reclaimed a key support level at $2.79 per mmBtu. Any continued momentum in the commodity will need to hold this key support level.

The commodity will likely face headwinds at $2.92 if momentum can carry prices higher. This level has served as both large support and resistance in multiple tests of this level in February sessions.

ng-chart-030615

Shifting Weather Patterns

March GFS forecasting models have been very inconsistent in recent days, leading to much frustration for analysts, commodity brokers, and traders/investors who are looking to judge the final weeks of the withdrawal season.

While understanding these inconsistencies, the latest models do show primarily milder temperatures in March (with the exception of this first week). The blasts of artic air seen in previous models are no longer present, and below average temperatures are small in area and short in length.

Storage Levels

As the withdrawal season winds down, the focus will be on the final level of natural gas in storage. The EIA reported on Thursday that current storage levels are 1,710 Bcf.

For the week ending March 6, 2015, initial withdrawal estimates range from -160 Bcf to -195 Bcf. For the week ending March 13, 2015, initial withdrawal estimates range from -70 Bcf to -90 Bcf.

If the higher range of these estimates are actually reported, storage levels could fall to between 1,400 and 1,450 Bcf. This level, as indicated in the table below, would be the fourth lowest level in the past 10 years.

natural-gas-end-of-year-storage-levels

Final Thoughts

If the momentum from yesterday’s bullish storage report is to continue, the above mentioned technical levels must hold, the weather patterns must shift again to below average temperatures in mid to late March, and storage levels must continue to deplete at an above average pace in the final weeks of withdrawal season.

To contact the reporter for this story, please email tim@natgasinvestor.com.

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.

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