Natural gas trading outlook: futures decline on projections of warmer temperatures

Natural gas decreased on Wednesday, marking a second drop this week on projections of milder weather over the majority of the US as the energy source swings between losses and gains.

Natural gas for delivery in January fell 0.66% to $3.628 per million British thermal units by 10:19 GMT. Prices held in a daily range between $3.677 and $3.626. The energy source gained 1.54% on Tuesday to $3.652.

According to NatGasWeather.com, natural gas demand in the US over the next seven days will be moderate, compared to normal, with a neutral, but becoming slightly colder trend for the December 17 – December 23 period.

The Nor’easter weather system will maintain its reign over the Northeast today, with areas of rain and snow, combined with strong winds, and leaving behind temperatures 10 degrees below normal. The system will moderate in strength as it stall over the eastern US during the next several days, with expectation of hard freezes in the Southeast.

However, a strong Pacific jet stream, which will change the overall weather pattern, is expected to arrive today into the western US coast, where heavy rains and snow are projected.

The central and northeastern US will enjoy above normal temperatures this weekend, until another weather system arrives on Monday with periods of rain and snow. This system will bring slightly colder temperatures and a burst of colder Canadian air over the Great Lakes and New England.

As next week progresses moist Pacific weather systems, dropping rain and snow over some areas, will continue to flow across the US every few days through December 21st. These waves of milder weather will push temperatures above normal over the majority of the country, especially in the central US.

However, colder weather systems may come back to the US around December 22-24th, with the possibility of Arctic air to move into southern Canada.

Temperatures

According to AccuWeather.com, temperatures in New York on December 11th will range between 32 and 38 degrees, below the average of 33-44, before reaching the above-seasonal 34-48 on December 16th. Chicago will see readings of seasonal 28-34 degrees on December 11th, before overtaking normal temperatures by 14 to reach 59 degrees on December 14th.

Down South, the high in Texas City on December 12th will be 65 degrees, slightly above usual, before falling to 52-59 degrees on December 17th. On the West Coast, today’s temperature in Los Angeles will peak at 73 degrees, 5 above normal, before readings moderate to seasonal 66 degrees on December 15th.

Supplies

The Energy Information Administration reported on Thursday that US natural gas inventories slid by 22 billion cubic feet in the week ended November 28th, below analysts’ projections ranging between 30 and 50 billion cubic feet. It was also beneath the five-year average gain of 50 bcf and last year’s decline of 141 bcf during the comparable period.

According to NatGasWeather.com this week’s EIA report is expected to bring a draw between 42 to 52 Bcf, which would allow deficits to make up ground on supplies. The EIA is scheduled to release new information tomorrow.

Total gas held in US storage hubs stood at 3.410 trillion cubic feet as of November 28th, narrowing its deficit to the five-year average of 3.782 trillion to 9.8% from 10.4% during the preceding seven days. Stockpiles were also 6.2% below the year-ago level of 3.637 trillion cubic feet.

The East Region saw a net withdrawal of 34 bcf to 1.830 trillion and was 9.1% below the five-year average, while inventories at the West Region rose by 1 bcf to 478 bcf and were 8.4% behind average levels. Stockpiles in the Producing Region rose by 11 bcf to 1.102 trillion, trailing the average by 11.6%.

Pivot Points

According to Binary Tribune’s daily analysis, January natural gas futures’ central pivot point stands at $3.656. In case the contract penetrates the first resistance level at $3.705 per million British thermal units, it will encounter next resistance at $3.757.

If breached, upside movement may attempt to advance to $3.806 per mBtu. If the energy source drops below its first support level at $3.604 per mBtu, it will next see support at $3.555. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.503 per mBtu.