Head of Commodity Strategy
Summary: Following another winter of volatile price action, natural gas has returned to, and is once again trying to establish support ahead of, the key $2.5/MMBtu level. Here are some potential catalysts for a rise in prices.
However, we still have a few weeks left before that happens and the late February/early March weather can still spring a few surprises. Please note that throughout these past few winter months, natural gas has often spiked higher or lower on Mondays when short-term weather forecasts were being updated over the weekend.
1) Colder than normal late winter/early spring weather driving stronger than expected demand.
2) Slowing production growth, especially as a byproduct from shale oil production (possible but unlikely to provide any immediate support).
3) Increased LNG exports (unlikely in the short-term due to an overhang of supply and low prices in both Europe and Asia following a milder than normal winter).
Natural gas (NGH9) is trading higher by 1.25% today ahead of the weekly inventory report from the US Energy Information Administration at 15:30 GMT. A Bloomberg survey points to a weekly stockpile draw of 165 billion cubic feet (bcf), well above last week’s draw of just 78 bcf and also higher than the five-year average of 148 bcf.
According to the US National Oceanic and Atmospheric Administration, the short-term weather outlook points to colder than normal temperatures through to March 26.