Natural gas futures fell last week after a report from the EIA showed that domestic supplies of natural gas fell by 48 billion cubic feet for the week-ended December 21. The number was just under the consensus of 50, but pretty close to the average of the range of guesses from several analysts.

Last week, March natural gas settled at $3.148, down $0.396 or -11.17%.

Total stocks now stand at 2.725 trillion cubic feet, down 623 billion cubic feet from a year ago, and 647 billion below the five-year average, the government said.

Forecast

All eyes are on the weather forecasts for the first week in January and especially next weekend. According to the National Weather Service (NWS), “the six-to-ten day forecast shows below average temperatures across much of the Midwest and Mid-continent regions with normal temperatures across the Great Lakes and Northeast. The West Coast and Southeast may see slightly warmer temperatures than average.”

NatGasWeather says, “There will still be a decent cold shot sweeping across the country January 1-3, but the break January 4-7 continues to trend warmer and longer, and where quite a bit of heating demand has been lost since early in the week.”

The forecaster went on to say, “Again, there’s likely to be very cold air over Canada during the second week of January, but cold over Canada is not cold over the U.S. and would need to trend further south for bullish sentiment to return.”

Although we may see a few short-covering rallies due to periodic cold snaps, there is nothing in the current forecasts that show expectations of lingering cold systems so the odds of a prolonged rally are low.

Firstly, the cold air parked in Canada is going to have to enter the U.S. Secondly, it is going to have park itself over key demand areas in the Midwest and on the East Coast. Prices are likely to continue to drop until more consistently cold weather patterns show up in the weather charts.

This article was originally posted on FX Empire

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