Natural gas trading outlook: futures fall on mild start to December

Natural gas fell slightly in quiet holiday trading on Thursday and extended its weekly decline as market players looked past a huge inventory withdrawal, with weather models pointing to a mild start to December.

Natural gas for delivery in January fell by $0.004 to $4.351 per million British thermal units by 8:35 GMT on Thursday, having ranged between $4.367 and $4.326 during the day. Prices slid 1.09% on Wednesday to $4.355, having earlier risen as much as 2.9% to $4.529 after the release of EIAs report.

The Energy Information Administration reported on Wednesday, a day earlier due to the Thanksgiving Day holiday, that US natural gas stockpiles declined by 162 billion cubic feet in the seven days through November 21st. This exceeded analysts expectations for a draw of 150 billion cubic feet, while the five-year average decline for the period was 6 bcf.

Total gas held in US storage hubs slid to 3.432 trillion cubic feet, widening its deficit to the five-year average of 3.832 trillion to 10.4% from 6.4% during the previous week. Stockpiles were also 9.2% below year-ago levels of 3.778 trillion.

Mild outlook

Despite the bullish report, the market reversed daily gains and settled lower amid expectations for moderating heating demand due to a mild start to December.

John Kilduff, a partner at Again Capital LLC, said for Bloomberg: “The market has a downward bias as the weather calms down and we start to see some moderation into the beginning of December. The past couple of days have been really volatile, with prices highly reactive to these forecasts.”

NatGasWeather.com reported on Wednesday that it expects natural gas demand in the US through December 2nd to be moderate-high, compared to normal, with a neutral trend for the following seven days.

In its Thursday update, NatGasWeather.com warned that a cold blast of Canadian air will sweep through the Midwest during the holidays, inducing strong heating demand. The countrys northern regions will see very cold temperatures through the weekend, but the eastern and western US will enjoy mild conditions early next week.

As new weather systems arrive next week, a shift to colder weather might occur between December 6th and 10th. However, mild conditions are expected to return afterwards as a strong jet stream returns to the western US, keeping Arctic air at bay over northern Canada.

Temperatures

According to AccuWeather.com, temperatures in New York on November 29th will range between 39 and 41 degrees, compared to the average of 38-49, before jumping to the above-seasonal 42-55 on December 4th. Chicago will see readings plunge to as much as 17 degrees today, 12 below usual, but a following warm-up will push the mercury up to seasonal and above-seasonal levels through December 10th.

Down South, the high in Texas City on November 29th will be 72 degrees, 5 above normal, and readings are poised to hold above average levels through December 9th. On the West Coast, Los Angeles will peak at 74 degrees on Saturday, 5 above usual, before moderating to the seasonal 69 degrees between December 3rd and December 5th.

Pivot points

According to Binary Tribune’s daily analysis, January natural gas futures’ central pivot point stands at $4.405. In case the contract penetrates the first resistance level at $4.479 per million British thermal units, it will encounter next resistance at $4.604. If breached, upside movement may attempt to advance to $4.678 per mBtu.

If the energy source drops below its first support level at $4.280 per mBtu, it will next see support at $4.206. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $4.081 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.