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March natural gas was set to open Friday about 3 cents lower at around $2.545 as an already lackluster winter weather outlook continued to trend warmer overnight.
Bespoke Weather Services said its forecasts “have just kept losing even more gas-weighted degree days, keeping pressure on natural gas prices as weather keeps them pressed into support.”
Overnight guidance further reduced cold risks, suggesting “heating demand into early March now remains decently below average, as the Pacific looks to be incredibly unfavorable for any sustained cold in most key demand regions through at least the next two weeks,” Bespoke said. “Our sentiment remains neutral heading into the weekend as natural gas clings to support, though if anything we now have a bit more of a bearish than a bullish bias as weather presents no real bullish catalyst to push prices higher.”
NatGasWeather.com said the models maintained milder conditions for late February while also “notably backing off the amount of cold air arriving into the East going into the first few days of March.”
The latest guidance effectively stalls “any chances of meaningful cold into the East until well into the first week of March,” the firm said. “...March prices have tested $2.53-2.54 numerous times this week and bounced, making this an important level that bulls will need to hold, because if taken out, stops could be waiting.
“Of course, there’s other reasons prices could rally, but if they were to do so, it’s not going to be attributed to cold weather.”
The March contract couldn’t seize any upward momentum Thursday despite a bullish storage report from the Energy Information Administration (EIA). EIA reported a net withdrawal of 194 Bcf from storage for the week ending Feb. 9, about 10 Bcf more than consensus estimates. Last year, 120 Bcf was withdrawn for the week, and the five-year average pull for the period is 154 Bcf.
“Though the market looks to be roughly 2-3 Bcf/d undersupplied” on a weather-adjusted basis “after Thursday’s print, stagnant supply/demand fundamentals going forward haven’t been enough to support the commodity,” said analysts with Tudor, Pickering, Holt & Co. Friday.
“Supply levels are champing at the bit and early withdrawal estimates are about 20% higher than norms for next week,” said analysts. There’s “no promise of a late February cold snap on eight- to 14-day forecasts, which are “still stacking against any remaining chance of a late winter gas rally.”
ICAP Technical Analysis analyst Brian LaRose said for March “to avoid a sharp dump to $2.189-2.121, the bulls need to make something happen fast. Rally from the $2.521 neighborhood and we will likely be forced to wait until the April contract rolls into the spot position to have a shot at our $2.189-2.121 objective. Fail to hold $2.521 and there is a good chance the March contract hits our target before rolling off the board.”
March crude oil was set to open about 5 cents higher at around $61.39/bbl Friday, while March RBOB gasoline was near even at $1.7359/gal.