Natural gas trading outlook: futures hold near 4-month high on cool weather

Natural gas held around $4.2, not far off from a four-month high, amid strong heating demand expectations in the Midwest and Northeast due to arctic air flows from Canada.

On the New York Mercantile Exchange, natural gas for delivery in December fell 0.10% to $4.190 per million British thermal units by 9:58 GMT. Prices ranged between $4.245, close to Wednesdays 4-month high of $4.315, and $4.188. The contract edged up 1.57% on Wednesday to $4.194 per mBtu, and is up around 8% so far this week.

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 13-19 time span.

Over the next couple of days the first of many weather systems will push out of the Midwest and flow into the eastern U.S., as rain showers will indicate its arrival, followed by snowfall. Light accumulations of snow are expected on Friday over portions of the Great Lakes and New England.

High pressure will continue to provide normal temperatures and dry conditions over the western U.S., with the exception of the Northwest, where a Pacific weather system will bring showers.

A second wave of moisture starved weather systems is expected to hit the Midwest and interior Northeast this weekend, NatGasWeather.com said in a report, before an arctic blast moves into the north-central U.S. late this week, bringing temperatures well below normal.

During the weekend and early next week Canadian arctic air will infiltrate the Midwest and Northeast, pushing temperatures under the normal. It will be chilly in the southern US, but as the week progresses, weather conditions will warm up to near normal. Meanwhile, the western US will remain warm and dry as high pressure dominates.

Temperatures

According to AccuWeather.com, readings in New York on November 11th will range between 46 and 63 degrees Fahrenheit, above the average of 43-56, before dropping to 32-44 degrees three days later. Chicago will slide to 33 degrees on November 11th, 4 below usual, and will range between 25-38 degrees on November 16th.

Down South, temperatures in Houston will max out at 77 degrees on November 10th, 3 above normal, before falling to 61 degrees on November 14th. On the West Coast, the high in Los Angeles on November 7th will be 87 degrees, 12 higher than normal, before dropping to as much as 74-76 degrees on November 13-14.

Supplies

The Energy Information Administration reported last 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.

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 85-87 bcf this Thursday, compared to the five-year average net injection of 42 billion cubic feet, while inventories rose by 35 bcf during the comparable period a year earlier. A build over 90 bcf would be quite bearish, while less than 82 will be seen as bullish. 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 $4.214. In case the contract penetrates the first resistance level at $4.295 per million British thermal units, it will encounter next resistance at $4.397. If breached, upside movement may attempt to advance to $4.478 per mBtu.

If the energy source drops below its first support level at $4.112 per mBtu, it will next see support at $4.031. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.929 per mBtu.