Natural gas trading outlook: futures hold above $4 as bad weather threatens the northern US

Natural gas retained previous gains and held firmly above $4 as forecasts warned about sub-freezing temperatures across the Midwest and Northeast.

On the New York Mercantile Exchange, natural gas for delivery in December fell 0.17% to $4.039 per million British thermal units by 9:38 GMT. Prices ranged between $4.069 and $4.029. The contract edged up 4.47% on Monday, the most since mid-June, to $4.046 per mBtu after it ended last week with a 4.73% increase, its biggest weekly gain since February.

According to NatGasWeather.com, natural gas demand in the US over the next seven days will become high, compared to normal, with a slightly colder weather trend for the November 11-17 time span.

The eastern U.S. will enjoy mild weather over the next couple of days, some of which may reach up to 60s and 70s. The central U.S. will be affected by a weak cool front. Later in the week, a quickly moving colder weather system will go through the Midwest and eastern U.S., before a much colder one arrives during the weekend. The Midwest and the Northeast will suffer from near or sub-freezing temperatures, after having warmed up early in the week.

A blast of Arctic air will move into southern Canada on Tuesday and next week will affect the Midwest and Northeast, bringing below normal temperatures. It is uncertain how far this weather system will travel, but it may offset the mild weather in the southern US, should it reach it. Meanwhile, weather in the western U.S. will be warmer than usual, NatGasWeather.com reported, as high pressure dominates. Additional bad weather systems may flow into the eastern U.S. and may result in stronger demand in the northeastern region.

Temperatures

According to AccuWeather.com, readings in New York on November 7th will range between 39 and 56 degrees Fahrenheit, below the average of 44-57, before changing to 40-54 degrees three days later. Chicago will drop to 38 degrees on November 7th, 2 below usual, and will range between 22-46 degrees on November 14th.

Down South, temperatures in Houston will max out at 81 degrees on November 4th, 5 above normal, before falling to the 67 degrees on November 12th. On the West Coast, the high in Los Angeles on November 6th will be 88 degrees, 13 higher than normal, before dropping to as much as 74-75 degrees on November 11-12.

Supplies

The Energy Information Administration reported on Thursday that US natural gas inventories rose by 87 billion cubic feet in the week ended October 24th, sharply exceeding the five-year average increase of 59 bcf and the 45-bcf gain during the comparable period a year ago. Analysts had projected an 85-bcf jump. Nevertheless, the market rallied on weather data.

Total gas held in US storage stood at 3.480 trillion cubic feet, narrowing the deficit to the five-year average to 8.2%, compared to 9.1% a week earlier. Inventories were 7.8% below the 3.774 trillion cubic feet of gas held in storage a year ago.

The EIA is expected to report a build of around 90 bcf this Thursday, which would outstrip the 5-year average gain by 30+ bcf. If confirmed, this would be seen as quite bearish. Support is expected to be drawn by weather data.

Pivot points

According to Binary Tribune’s daily analysis, December natural gas futures’ central pivot point stands at $4.033. In case the contract penetrates the first resistance level at $4.078 per million British thermal units, it will encounter next resistance at $4.109 If breached, upside movement may attempt to advance to $4.154 per mBtu.

If the energy source drops below its first support level at $4.002 per mBtu, it will next see support at $3.957. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.926 per mBtu.

In weekly terms, the central pivot point is at $3.816. The three key resistance levels are as follows: R1 – $4.012, R2 – $4.151, R3 – $4.347. The three key support levels are: S1 – $3.677, S2 – $3.481, S3 – $3.342.