Natural gas trading outlook: futures extend losses on milder weather expectations

Natural gas fell for a third time this week as forecasting agencies projected warmer temperatures over the majority of the US later this month.

Natural gas for delivery in February traded 1.15% lower at $2.838 per million British thermal units at 9:17 GMT, having shifted in a daily range of $2.897-$2.816. The energy source lost 2.28% on Wednesday to $2.871 per mBtu.

According to NatGasWeather.com, US natural gas demand will be very high compared to normal through January 14th, but will become moderate-to-high, with a slightly warmer trend for the following seven days.

Very cold temperatures are expected to persist over the central and eastern US through Saturday morning, with lows reaching single digits and well below the zero mark. The freezing temperatures will be primarily focused over the Midwest and Northeast. Colder-than-usual readings are also projected to cover Texas and the Southeast, where readings will hit single digits and teens.

Meanwhile, the western US will remain quite mild going into next week as high pressure dominates the region, NatGasWeather.com reported.

Milder southern US air will start its movement northward late this weekend, allowing temperatures to reach normal or near normal levels, while also pushing the Arctic air back to Canada early next week. Later in the week, parts of the central and eastern US are projected to experience periods of rain and snow brought by a fast moving weather system, followed by a strong cold blast.

The colder conditions will not last long however, NatGasWeather.com said, as Pacific weather systems are expected to continuously flow into the Midwest and Northeast and ensure overall milder conditions after January 17th. The rest of the country is projected to enjoy near-seasonal or slightly warmer weather as well.

Temperatures

According to AccuWeather.com, temperatures in New York tomorrow will range between 17 and 33 degrees Fahrenheit, below the average of 27-38, before reaching seasonal levels on January 12th. Chicago will range between 1 and 13 degrees today, 19 beneath the normal, and will remain colder than usual through January 16th.

Down South, Houston will see readings range between 35 and 41 degrees today, compared to the average of 45-63, before temperatures reach seasonal levels on January 12th. On the West Coast, Los Angeles will range between 54 and 71 degrees tomorrow, compared to the usual 48-68, with reading projected to stay slight above normal through January 17th.

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, much larger compared to last weeks data, but still under the five-year average. Analysts project that if the report shows a draw below 120 bcf, it would be considered as quite bearish.

Pivot Points

According to Binary Tribune’s daily analysis, February natural gas futures’ central pivot point stands at $2.903. In case the contract penetrates the first resistance level at $2.980 per million British thermal units, it will encounter next resistance at $3.090. If breached, upside movement may attempt to advance to $3.167 per mBtu.

If the energy source drops below its first support level at $2.793 per mBtu, it will next see support at $2.716. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.606 per mBtu.