Thursday, January 31, 2013

CME Group: Natural Gas Inventory Withdrawal Below Market Consensus

Today's natural gas inventory came in below the market consensus but still above both last year and the five year average for the same week. The market has viewed the data as bearish in that the market is off about 2% as of this writing. It also supports my view that I have discussed in the newsletter that yesterday's gain in prices were mostly driven by a short covering rally ahead of the expectation for a bullish inventory report today. Another way of looking at the reaction is a buy the rumor, sell the fact pattern.

Next week's inventory report is going to be based on a period that has experienced very warm weather over a major portion of the eastern half of the US and thus the inventory withdrawal is likely to underperform versus history. The latest NOAA six to ten day and eight to fourteen day forecasts remain bearish as they are both projecting above normal temperatures over a major portion of the US for the period February 4th through the 13th.

Inventory withdrawals are likely to underperform versus history during the aforementioned timeframe. With the longer range forecast projecting March to experience above normal temperatures over most of the US.... a sort of early spring.... that does not leave much potential for a sustained winter cold spell. The fundamentals remain bearish and are likely to stay bearish based on the current weather forecasts for the rest of the official heating season which end at the end of March.

Read the entire CME Group article and see Dominick Chirichellas detailed charts.


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