Natural gas trading outlook: futures fall after ending two-day losses

Natural gas fell slightly after a one-day gain amid mixed weather forecasts predicting a colder Thanksgiving period, but also an overall mild start to December. Investors eyed Wednesdays EIA natural gas stockpiles report.

Natural gas for delivery in January lost 0.45% to $4.383 per million British thermal units by 11:14 GMT. Prices held in a daily range between $4.451 and $4.378 during the day. The energy source gained 2.30% on Tuesday to $4.403, snapping two consecutive days of losses.

According to NatGasWeather.com, natural gas demand in the US over the next seven days will be moderate-to-high, compared to normal, with a neutral trend for the December 2 – December 9 period.

The eastern US coastline will experience periods of rain and snow on November 26, brought by a fast traveling weather system. Over the Northeast snow accumulations of several inches are expected by early evening, accompanied by colder air. The highest readings on Thanksgiving Day will have trouble reaching above freezing temperatures over the the Midwest and Northeast as a blast of colder and drier Canadian air flows through the region.

During the weekend a second wave of very cold air will affect the far northern US. Meanwhile, two thirds of the southern US will enjoy mild temperatures.

Early next week, built up high pressure will push temperatures above normal over the southern and eastern US, NatGasWeather.com reported. However, colder weather systems with rain and snow will revisit the eastern US next Thursday, also leaving an impact in the central parts of the country.

Temperatures over the western US will be near or slightly above normal with high pressure dominating the Southwest, while milder systems travel through the Northwest. Cold weather is expected for the December 7th – 9th period but milder patterns are likely to follow.

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 hubs 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 show. 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.

Temperatures

According to AccuWeather.com, readings in New York on November 27th will range between 28 and 40 degrees Fahrenheit, below the average of 38-58, before climbing to 36-50 on December 1st. Temperatures in Chicago will range between 19 and 26 degrees on November 27, compared to the average of 29-42. On December 2nd, the mercury will reach 48 degrees, 8 above normal.

Down South, the high in Texas City on November 27th will be 63 degrees, 5 below normal, before increasing to as much as 74 degrees on December 1st. On the West Coast, Los Angeles will enjoy warmer-than-usual weather through November 29th with readings peaking at 86 on November 26th and 27th, followed by a slide to seasonal levels of 51-66 degrees on December 2nd.

Pivot Points

According to Binary Tribune’s daily analysis, January natural gas futures’ central pivot point stands at $4.358. In case the contract penetrates the first resistance level at $4.489 per million British thermal units, it will encounter next resistance at $4.575. If breached, upside movement may attempt to advance to $4.706 per mBtu.

If the energy source drops below its first support level at $4.272 per mBtu, it will next see support at $4.141. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $4.055 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.