Natural gas trading outlook: futures extend losses on warmer weather forecasts

Natural gas fell for a fourth out of five trading sessions, despite huge inventory withdrawal, on projections of soft temperatures in early December.

Natural gas for delivery in January fell by 3.49% to $4.203 per million British thermal units by 9:52 GMT on Friday, having ranged between $4.367 and $4.187 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 EIA’s 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.

Although the report pointed towards buying, the market lost daily gains and closed with a decrease amid projections of moderating heating demand in early December due to above normal temperatures.

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 hat 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.

The weather agency also warned about a cold blast of Canadian air flowing into the Midwest during the holidays, pushing heating demand higher. Northern regions of the country will be affected by very cold temperatures through the weekend, however, mild conditions will reign over the eastern and western US early next week.

Several colder weather systems will arrive in the US over the December 6-10 period, but milder temperatures are expected to return afterwards as a strong 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 30th will range between 48 and 58 degrees, above the average of 37-48, before sliding to seasonal 34-46 on December 5th. Chicago will see readings of 32-33 degrees on November 28th, before increasing to as much as 47 on November 30, 6 above seasonal normal.

Down South, the high in Texas City on November 29th will be 73 degrees, 6 above normal, and readings are poised to hold above average levels through December 5th. On the West Coast, todays temperature in Los Angeles will peak at 81 degrees, 11 above usual, before moderating to the seasonal 69-70 degrees between December 3rd and December 6th.

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.