Natural gas trading outlook: futures swing on mild weather, inventories eyed

Natural gas swung between gains and losses as forecasting agencies predicted a mild start to December, followed by the return of colder-than-usual weather. Investors also eyed this weeks EIA inventory report, projected to show a triple-digit withdrawal.

Natural gas for delivery in December gained 0.37% to $4.320 per million British thermal units by 9:37 GMT. Prices held in a daily range between $4.338 and $4.261 during the day. The energy source dropped 2.56% on Monday to $4.304, following up on a 4.99% drop on Friday.

According to NatGasWeather.com, natural gas demand in the US over the next seven days will be moderate-to-high, compared to normal, with an overall neutral trend for the December 1 – December 7 period.

A weather system tracking over the eastern US will bring slightly colder-than-usual temperatures over the next few days. Although readings wont drop much below seasonal, it will pave the way for a much stronger cold blast that will set up across the North on Thanksgiving Day and during the weekend. This will induce much higher heating demand as readings remain at or below freezing levels over the Midwest and interior Northeast, while the southern US remains mild.

Late this weekend, the arrival of a strong Pacific jet stream will significantly reduce heating demand as above-seasonal temperatures cover much of the US early next week, especially the southern and eastern regions. However, the warm-up is not expected to last long, NatGasWeather.com reported, as a new round of cold weather systems arrive later in the week, carrying rains and snow and pushing temperatures back to below usual.

Temperatures

According to AccuWeather.com, readings in New York on November 26th will range between 28 and 40 degrees Fahrenheit, below the average of 38-58, before climbing to 42-50 on November 30th. Temperatures in Chicago will range between 25 and 32 degrees on November 26, compared to the average of 30-43. On December 2nd, the mercury will reach 65 degrees, 25 above normal.

Down South, the high in Texas City on November 26th will be seasonal 69 degrees, before increasing to as much as 74 degrees on November 30th. On the West Coast, Los Angeles will enjoy warmer-than-usual weather through November 29th with readings peaking at 86 and 84 on November 26th and 27th respectively, followed by a slide to below-seasonal levels of 59 degrees on December 1st.

Supplies

The Energy Information Administration reported last Thursday that US natural gas stockpiles fell by 17 billion cubic feet (bcf) in the seven days ended November 14th, the first withdrawal since March. This exceeded both analysts’ expectations for a decline of 6-12 billion cubic feet and the five-year average drop of 10 bcf.

Total gas held in US storage hub fell to 3.594 trillion cubic feet, widening the deficit to the five-year average of 3.838 trillion to 6.4% from 6.2% during the previous period. Last week’s inventory level was also 5.3% below the previous year’s 3.795 trillion during the comparable period.

Last week’s impressive Arctic blast is projected to have led to a significant draw for this week’s report, expected to exceed the 100-bcf mark, possibly reaching 150 bcf. The five-year average withdrawal for the week ending November 21st is 6 billion cubic feet.

About 49% of US households use gas for heating, data by the EIA shows. The government agency said in its monthly Short-Term Energy Outlook report on November 12 that gas production may jump 4.8% this year to the average of 73.79 bcf per day.

Pivot Points

According to Binary Tribune’s daily analysis, January natural gas futures’ central pivot point stands at $4.258. In case the contract penetrates the first resistance level at $4.360 per million British thermal units, it will encounter next resistance at $4.417. If breached, upside movement may attempt to advance to $4.519 per mBtu.

If the energy source drops below its first support level at $4.201 per mBtu, it will next see support at $4.099. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $4.042 per mBtu.

In weekly terms, the central pivot point is at $4.304. The three key resistance levels are as follows: R1 – $4.494, R2 – $4.723, R3 – $4.913. The three key support levels are: S1 – $4.075, S2 – $3.885, S3 – $3.656.