Natural gas trading outlook: futures steady on weather transition

Natural gas gained for a second consecutive session on Wednesday as forecasting agencies projected temperatures to reach below zero over some US regions, but extended forecasts showing seasonal readings across the majority of the country capped gains.

Natural gas for delivery in February traded 0.27% higher at $2.946 per million British thermal units at 9:05 GMT, having shifted in a daily range of $2.970-$2.909. The energy source edged up 1.94% on Tuesday to $2.938 per mBtu.

According to NatGasWeather.com, US natural gas demand will be very high compared to normal through January 13th, but becoming moderate, with a slightly warmer trend for the following seven days.

A strong Arctic blast will maintain its presence over the central and eastern US until Sunday, accompanied by freezing temperatures. The coldest readings will be focused over the Midwest and Northeast, with lows reaching single digits and well below the zero mark.

Conditions in the northern US will not change over the weekend as cold blasts continue to crash into the region and keep temperatures below normal, with readings reaching extreme lows over Texas and the Southeast.

Early next week a surge of milder southern US air is expected to flow into the northern US, NatGasWeather.com said, slowly lifting temperatures to seasonal levels as the Arctic air retreats into Canada. The western US will enjoy quite mild conditions as high pressure dominates over the region.

By mid-next week milder temperatures will take over the majority of the US. However, very cold Canadian air may flow into the Midwest and Northeast around January 17th, bringing freezing temperatures. However, the cold blast is not expected to reach very deep into the US, nor stay very long.

Temperatures

According to AccuWeather.com, temperatures in New York tomorrow will range between 19 and 21 degrees Fahrenheit, below the average of 27-38, before reaching seasonal levels on January 12th. Chicago will range between -8 and 4 degrees today, 28 below the normal, and will remain colder than usual through January 16th.

Down South, Houston will see readings range between 28 and 54 degrees today, compared to the average of 45-63, before the mercury slides to 37-41 on January 10th. On the West Coast, Los Angeles will range between 53 and 75 degrees tomorrow, compared to the usual 48-68, before temperatures moderate to seasonal levels on January 10th.

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 week’s draw is expected to be around 125-132 Bcf.

Pivot Points

According to Binary Tribune’s daily analysis, February natural gas futures’ central pivot point stands at $2.901. In case the contract penetrates the first resistance level at $2.992 per million British thermal units, it will encounter next resistance at $3.045. If breached, upside movement may attempt to advance to $3.136 per mBtu.

If the energy source drops below its first support level at $2.848 per mBtu, it will next see support at $2.757. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.704 per mBtu.