Natural gas trading outlook: futures hold below $4 on moderating weather forecasts

Natural gas headed for a sizable weekly loss after scoring the biggest daily decline since end-February on Thursday as weather forecasts called for the return of near-normal temperatures across most of the US late next week.

Natural gas for delivery in December traded at $3.989 per million British thermal units at 10:33 GMT, having shifted in a daily range between $4.001 and a two-week low of $3.956. The energy source slid 4.97% on Thursday to $3.977 and is down almost 10% this week, which would be the biggest weekly drop in nine months.

According to NatGasWeather.com, cold weather across the US will keep national natural gas demand over the next seven days at high and very high levels, compared to normal, but the weather trend for the November 21-27 span will shift to slightly warmer.

The entire US, apart from the southwestern areas, remain covered by much colder than usual readings, reaching 18-30 degrees Fahrenheit below usual. Overnight lows over the northern Plains and Rockies are expected to remain in the single digits and below the zero mark over the next few days, while the Midwest and interior Northeast will see readings in the 20s.

As the current Arctic blast tracks out of the eastern US, a new cold blast will enter the northern US early next week, carrying fresh below-freezing temperatures and having a greater impact on the Midwest and Northeast compared to the current system.

Despite the cold short-term outlook, natural gas plummeted as extended forecasts projected a warm-up in the last ten days of November. Late next week, a Pacific jet steam will enter the western US, NatGasWeather.com reported, paving the way for milder weather systems to infiltrate the northern US, while the remaining portions of the country will also enjoy near-normal readings.

Temperatures

According to AccuWeather.com, readings in New York on November 18th will range between 29 and 39 degrees Fahrenheit, well below the average of 41-53, before jumping to the seasonal 36-51 degrees on November 23rd. Boston will see the mercury plunge to 28 degrees on November 18th, 9 below normal, before rising to as much as 45 degrees a week later.

Temperatures in Chicago will range between 18 and 28 degrees on November 18th, compared to the average of 34-48, but will reach the above-seasonal 38-55 degrees on November 24th.

Down South, Houston will max out at 53 degrees on Monday, 19 beneath normal, before surging to the seasonal 70-72 between November 20-22. On the West Coast, Los Angeles will reach 75 degrees on November 16th and 17th, compared to the average of 72, and is expected to hold at or above seasonal levels through November 28th.

Supplies

The Energy Information Administration reported last Thursday that US natural gas stockpiles rose by 91 billion cubic feet in the week through October 31st, exceeding analysts’ projections for a jump of 85-87 bcf. Total gas held in US storage stood at 3.571 trillion cubic feet, narrowing its deficit to the five-year average of 3.832 trillion by 1.4% to 6.8% from a week earlier. Gas stockpiles were 6.2% below year-ago levels.

This week’s build is expected to probably be the last for the year that would provide a gain on deficits, with analysts projecting a build of around 36 billion cubic feet. Inventories rose by 22 billion cubic feet during the comparable period a year earlier, while the five-year average gain is 16 bcf. Official data is due on Friday at 15:30 GMT.

Pivot points

According to Binary Tribune’s daily analysis, December natural gas futures’ central pivot point stands at $4.038. In case the contract penetrates the first resistance level at $4.114 per million British thermal units, it will encounter next resistance at $4.251. If breached, upside movement may attempt to advance to $4.327 per mBtu.

If the energy source drops below its first support level at $3.901 per mBtu, it will next see support at $3.825. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.688 per mBtu.