The market has been staying close to the $2.15 range. This isn't surprising considering that the weather forecast is pretty bearish into the end of January to early February and the weakness in monthly contract settlement is somewhat at bay for now.
Prices have so far held the support around the 50% Fib retracement of the $1.68 low to the recent $2.49 high. The market was clearly way over-sold in early to mid-December 18th as the Large Hedge Funds then had their largest net short position in over five years.
We still don't expect a return to those levels absent extraordinarily mild weather in February and March. Conversely, the inevitably high storage levels projected by the end of March will limit the upside for at least a while until the storage surplus begins to relent further.
The market could well be stuck in a $1.95ish by $2.35ish range for the next four to six weeks until a typical Q2 rally can begin to possibly show up in earnest.
Natural Gas Storage
The weekly storage report indicated a draw of 178 bcf last week which was below the general market expectations of 185 bcf. The market's reaction to such was negligible in either direction after the release of the report by EIA.
This places total storage levels at 3,297 bcf for the week ended January 15th, equating to a surplus of 629 bcf to last year and an overage of 473 bcf to the five year average. The surplus to last year is likely to be down to around 475 bcf by the end of January as the next two weeks will likely receive favorable year-on-year comparisons with colder temps than last year for those same two weeks (but remember that Feb will likely have unfavorable year-on-year comparisons).
From October 31, 2015 through January 15, 2016, the total draws have been 1,247 bcf versus 934 bcf over the same period last year. Storage draws are actually higher this year so far, by almost 4.0 bcf/d, despite extremely mild weather cumulatively since the withdrawal season began. This fact is not that noticeable as absolute levels are still so relatively high due the “starting point” of a high peak level of 4,006 bcf in mid November.
Longer term, the end-of-season level is still pointing to a bearish level of 2,000 to 2,100 bcf absent any radical change (either direction) in weather-to-normal temps in February and March.