Natural gas prices closed higher today as short covering ahead of tomorrow's EIA storage report buoyed the market after five days of heavy selling.
The market bottomed out at a new 2-month low on Tuesday just under the 1.900 level with most of the forward strips setting new all-time price lows.
Tomorrow's EIA weekly storage number is expected to show a 150 Bcf draw, above last year's 117 Bcf pull but well below the 170 Bcf averaged over the past 5 years. There have only been 4 storage withdrawals during this current winter which have exceeded the five year average.
Weather has turned colder in the eastern U.S. on the 8-11 day forecast but the longer range 30 and 60 day outlooks remain negative for end of winter heating demand.
Storage is expected to fall in the 2,100-2,200 Bcf range by winter's end, the second highest on record, but could be higher depending on upcoming demand or lack of.
Tomorrow's EIA storage report could hold a bullish surprise as there was some discrepancy with last week's lower than expected withdrawal. A lower withdrawal last week could be revised to a larger than expected withdrawal in tomorrow's storage report.
The overall fundamental outlook for the natural gas market remains bearish but when bearish sentiment reaches an extreme, market reversals can sometimes occur.
If prices do reverse back higher, sellers will likely reenter on strength pushing the market back lower over time.
As pointed out many times before, the true test for this market will be when winter heating demand goes completely away over upcoming weeks.
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