Natural gas trading outlook: futures extend losses on forecasts for warmer temperatures

Natural gas fell for a fourth out of five sessions on Tuesday to trade above a two-year low it reached on Friday as forecasting agencies predicted milder conditions over most states.

Natural gas for delivery in February traded 0.24% lower at $2.875 per million British thermal units at 9:12 GMT, having shifted in a daily range of $2.950-$2.870. The energy source dropped 4.03% on Monday to $2.882 per mBtu, the lowest settlement since September 24th, 2012.

According to NatGasWeather.com, US natural gas demand will be very high compared to normal through January 12th, with a slightly warmer trend for the following seven days.

A strong Arctic blast will maintain its position over the central and eastern US and will keep temperatures below normal through the week, with lows reaching single digits and below the zero mark. The colder temperatures will be focused over the Midwest and Northeast.

Over the weekend cold blasts will continue to crash into the northern US, NatGasWeather.com reported, while also bringing sub-freezing conditions to Texas and the Southeast. With the exception of alley rains and mountain snows over the northwestern US, the western US will enjoy quite mild weather.

Early next week a surge of milder southern US air is expected to flow into the northern US, slowly lifting temperatures to seasonal levels, while the Arctic air retreats into Canada.

Later next week very cold air will arrive over southern Canada, which is most likely to bring colder temperatures to the Midwest and Northeast. However, the movement is not expected to reach very deep into the US, nor stay very long. Temperatures over the western, central, and southern US will become close or slightly higher than normal.

Supplies

The Energy Information Administration reported last Wednesday the fifth consecutive below-average weekly withdrawal in US natural gas inventories. Stockpiles recorded a drop of 26 billion cubic feet, well below analysts’ expectations for a decline in the range of 35-40 bcf and the five-year average withdrawal of 114 bcf.

This brought inventories to 3.220 trillion cubic feet, narrowing the deficit to the five-year average storage of 3.301 trillion to 2.5% from 4.9% a week earlier, while the surplus to year-ago levels expanded to 7.8% from 4.8%. This weeks draw is expected to be around 125-132 Bcf.

Temperatures

According to AccuWeather.com, temperatures in New York tomorrow will range between 10 and 28 degrees Fahrenheit, below the average of 27-38, before reaching seasonal levels on January 12th. Chicago will range between -8 and 4 degrees on January 7th, 28 below the normal, and will remain colder than usual through January 10th.

Down South, Houston will see readings range between 45 and 60 degrees today, compared to the average of 45-63, before the mercury slides to 35-46 on January 9th. On the West Coast, Los Angeles will range between 54 and 79 degrees tomorrow, compared to the usual 48-68, before temperatures moderate to seasonal levels on January 10th.

Pivot Points

According to Binary Tribune’s daily analysis, February natural gas futures’ central pivot point stands at $2.978. In case the contract penetrates the first resistance level at $3.080 per million British thermal units, it will encounter next resistance at $3.279. If breached, upside movement may attempt to advance to $3.381 per mBtu.

If the energy source drops below its first support level at $2.779 per mBtu, it will next see support at $2.677. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.478 per mBtu.