The natural gas market faces many daunting headwinds, first and foremost, record high storage and second, low winter-related heating demand.
Longer range weather forecasts into February have grown increasingly milder although a significant winter storm system is expected to move across the upper U.S. This could boost heating demand depending on snow cover more so than the market may be expecting.
Tomorrow's EIA weekly storage report is expected to show a 185 Bcf draw from storage in comparison to last year's 220 Bcf withdrawal and a 5-year average pull of 177 Bcf. If correct, it would only be the third withdrawal of this winter season which has exceeded the 5-year average.
With current gas in storage of 3,475 Bcf and 11 weeks to go in the withdrawal season, end of March storage is on pace to exceed the 2,000 Bcf mark for only the second time in the past 10 years. This year's storage will likely fall below the end of March all-time high of 2,472 Bcf set in 2012, but will be well above the 10-year average of 1,587 Bcf.
Tomorrow's storage withdrawal could top the 200 Bcf mark if rumors circulating are correct providing another short-squeeze in the market and higher prices.
While the near term trend may turn up, it is not expected to last as high storage and lower demand should keep a cap on prices.
Seasonally, the months of March or April are when the market sets a post-winter low ahead of the summer cooling season. This could also be the time period to add to long term coverage in the market near a 14-year price low.
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