Natural gas futures are edging lower late Wednesday despite forecasts
calling for a polar vortex, or subfreezing air descending from Canada
and covering most of the continental United States in late January.To
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The price action suggests traders are approaching the possible onset
of the extremely cold temperatures at the end of the month cautiously.
Meanwhile, expectations of increased demand for U.S. liquefied natural
gas (LNG) in Europe and Asia are expected to underpin the market.Both
the American and European weather models are calling for a heavy dose of
cold by late last week, but the pattern is not expected to be as strong
as the polar vortex that hit the U.S. in 2014. This may be dampening
demand expectations.
NatGasWeather said prices were boosted early by the “hype of cold now
for January 23-26.” Major models in the afternoon, however, showed “not
quite as cold air into Western Canada, thereby pushing less impressive
subfreezing air into the U.S. as well in late January… ”Of course, the
data could flip back colder overnight and will be watched very closely
by market participants.It may not get as cold as initially expected in
the U.S. when the polar vortex arrives, but Asia and Europe are expected
to experience freezing conditions that should drive up heating fuel
needs.
Although LNG volumes fell below 10 Bcf on Tuesday for the first time
this year, LNG data showed, this was blamed on temporary delivery
interruptions. However, export demand is expected to climb back above 11
Bcf this winter, a level at which it straddled for several days last
week, according to Natural Gas Intelligence (NGI).
Daily March Natural GasShort-Term Outlook
March natural gas futures are going to have a hard time rallying over
the short-run if the expected cold isn‘t powerful enough to drive prices
over the top of a key resistance zone at $2.918. This price is a
potential trigger point for an acceleration to the upside. A
short-covering rally won’t cut it. Real buyers have to have a reason to
show up. Meanwhile, the market is likely to continue to find resistance
at $2.794.
There is support, however, both technical and fundamental.
Technically, minor support is $2.698, but the main support is $2.552 to
$2.485. Fundamentally, strong LNG demand could prevent a wash-out to the
downside.
The Wall