February natural gas was set to open Friday about 7 cents higher at around $3.160, building further on Thursday's 17.8-cent surge following a record storage pull that exceeded market expectations.
The Energy Information Administration (EIA) reported a staggering 359 Bcf withdrawal from U.S. natural gas stocks for the week ending Jan. 5, a bullish surprise that easily toppled the previous record set in January 2014.
Coming off the most potent stretch of heating demand since the notorious polar vortex-influenced 2013-2014 winter, consensus estimates before the report had predicted a record withdrawal. But the actual number still surpassed the median estimates by around 25 Bcf.
Powerhouse President Elaine Levin told NGI that "after "finishing Thursday right at the highs, my guess is you'd see some follow-through that may get you up to test" the $3.15-3.20 area.
According to analysts with Rafferty Commodities Group, on Thursday the prompt month "took out two of our major resistance levels -- $3.067 and $3.087 -- and closed above one of them. On Wednesday, prices could not take out our $3.000 resistance level and then it sold off from there. As a result, we were looking for more downside follow-through but instead we got a big up day in the market.
"...We would be open to playing both sides...because the market is in a longer-term consolidation pattern," the analysts said. "...One characteristic of a consolidation pattern is that the market cannot get any sustained momentum in either direction. This requires us to be nimble and quick to realize we may be wrong and need to reverse course. Thursday was such a day."
There were only small changes overnight in the weather data, "as it seems models have locked onto the intensity of the coming cold shot over the next week and have stopped intensifying it," Bespoke Weather Services said Friday.
"...Our sentiment sits at neutral as we see the risk for the February natural gas contract to make one leg higher Friday towards $3.20 on continued short-covering and short-term cold, but are skeptical that any move lasts much longer given expectations of warmer weather" Jan. 20 through the end of the month.
Following Thursday's run higher, ICAP Technical Analysis analyst Brian LaRose asked, "$3.431-3.477 here we come? That would be the minimum implied objective break to the upside.
"But the bulls are not out of the woods just yet," LaRose said. "For us to set our sights on higher prices they still need to lift natural gas up and over $3.089-3.133. Decisively. On a closing basis. Only if the bulls are successful will they have a green light to proceed north from here."
February crude oil was set to open about 57 cents lower at around $63.23/bbl Friday, while February RBOB gasoline was down fractionally at around $1.8289/gal.