Weekly Natural Gas Storage Report - Early Spring Like Conditions Coming

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Includes: BOIL, DGAZ, GAZB, KOLD, UGAZ, UNG, UNL
by: HFIR Energy
Summary

EIA reported a storage draw of 166 Bcf for the week ending Feb. 22. This compares to the -173 Bcf we projected and consensus average of -173 Bcf.

For the week ending 3/1, we have a storage draw of -135 Bcf.

EOS is forecasted to be 1.184 Tcf.

Weather models revised HDDs lower, but natural gas prices are failing to price in the warmer than normal outlook in mid-March.

We were initially stopped out of our DGAZ long position, but we have re-entered a 2x position.

Welcome to the weekly natural gas storage report edition of Natural Gas Daily!

EIA reported a storage draw of 166 Bcf for the week ending Feb. 22. This compares to the -173 Bcf we projected and consensus average of -173 Bcf. The -166 Bcf was higher than the five-year average of -118 Bcf and higher than last year's -78 Bcf.

Source: EIA

Next Week's Estimate

For the week ending 3/1, we have a storage draw of -135 Bcf. EOS is forecasted to be 1.184 Tcf.

Trading Position

We were initially stopped out of our DGAZ long position this morning for a loss of 9.58%. But our analysis indicates that the trend is downward as the middle of March turns warmer than normal. We doubled up our DGAZ long position.

Early Spring Like Conditions Coming...

Natural gas prices moved up today despite lower heating degree day forecasts from GFS-ENS and ECMWF-EPS. The market has more than priced in the early March cold blast, in our view, but is failing to discount the much warmer than normal outlook for the middle of March.

Looking at the 11-15 day forecast for GFS-ENS and ECMWF-EPS, both are aligned that the outlook is warmer than normal in the demand regions. In addition, the ECMWF-EPS long-range outlook appears to show the warmer than normal trend lasting to the end of March. This means it will be early Spring like conditions for the Northeast.

Source: StormVistaWxModels.com

Lastly, couple this with the fact that April contracts are already trading at $2.85 indicates to us that the market has already priced in the bullish cold blast we see early next week. But that cold blast is not expected to last as you can see from the forecast above. By the middle of March, the bullish weather goes away and early Spring like conditions take over.

This is why we are short natural gas via a long position in DGAZ. We are holding our position into the weekend.

Disclosure: I am/we are long DGAZ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.