Natural gas futures weekly recap: January 12 – January 16

Natural gas settled lower on Friday, trimming a weekly advance, after swinging between gains and losses amid forecasts for active and still unclear weather developments for the last two weeks of January.

Natural gas for delivery in February fell $0.072 on Friday on the New York Mercantile Exchange to settle the week 4.1% higher at $3.086 per million British thermal units. Prices held in a weekly range of $3.352, touched on Thursday, and Mondays low of $2.783.

The energy source surged by more than 15% on Tuesday and Wednesday as weather forecasts called for colder weather across the Midwest and Northeast later in the month and ahead of EIAs weekly inventory report that was expected to show a larger-than-average storage withdrawal during the previous week. The market, however, gave back some of the accumulated gains later in the week on technical trading and as forecasting agencies predicted overall milder weather across the remaining portions of the US.

NatGasWeather.com reported on Friday that natural gas demand in the US will be moderate compared to high through January 22nd, with a neutral to slightly-colder weather trend for the following seven days.

Cold Canadian air was affecting the Great Lakes and interior Northeast on Friday before the regions began to warm up during the weekend. The rest of the US remains quite mild, with temperatures over the South expected to range between the 50s and lower 70s.

Another brief blast of colder temperatures will hit the Midwest and Northeast on Sunday and Monday, but overall national temperatures through mid-next week will be above-normal, with morning readings set to top seasonal levels by 8-20 degrees Fahrenheit.

However, colder air will once again enter the northern US around January 22nd-23rd, NatGasWeather.com reported, but the most threatening Arctic air will likely be contained over Canada, inducing only a brief cold blast over the Great Lakes.

After the cold system leaves, mild temperatures will dominate the Midwest and Northeast between January 24th-26th, before another cold blast arrives, bearing the potential for much colder Arctic air to get tapped into the North around January 28th.

“There remains no guarantees how much cold arrives or which regions will be impacted,” NatGasWeather.com said in a Friday mid-day update. “But it should be somewhat concerning going into the MLK Holiday weekend that there is going to be very cold air threatening the US, because if Arctic patterns gain traction, the markets could gap higher next week.”

Temperatures

According to AccuWeather.com, readings in New York will range between 30 and 39 degrees on January 20th, compared to the average 27-38, and will remain close to normal levels likely through the end of the month. Chicago will enjoy mostly seasonal weather through January 26th, with readings on January 24th set to range between 25 and 34 degrees Fahrenheit, compared to the average 18-31.

Down South, temperatures in Houston will max out at 71 degrees on January 20th, 8 above normal, but will then retreat to remain mostly near the average 46-64 through January 29th. On the West Coast, Los Angeles will be warmer than usual for the remaining portion of the month, with readings set to range between 53 and 73 degrees on January 23rd, compared to the average 48-68.

Supplies

The Energy Information Administration reported on Thursday that US natural gas inventories declined by 236 billion cubic feet in the week ended January 9th, compared to analysts’ projections for a decrease in the range of 220-230 bcf. The drop exceeded the five-year average draw of 190 bcf, while inventories slid by 268 bcf a year earlier.

Total gas held in US storage hubs amounted to 2.853 trillion cubic feet, expanding a deficit to the five-year average inventories of 2.966 trillion to 3.8% from 2.1% during the previous week, or 113 bcf. The surplus to the year-ago stockpiles level of 2.571 trillion cubic feet expanded to 11.0%.

Next week’s report is also projected to show an above-average weekly decline as the recent Arctic blasts are factored in. The EIA will likely report a withdrawal of more than 200 billion cubic feet, compared to the five-year average of -176 bcf and the 133-bcf drop during the comparable week a year earlier. However, the following one should be much thinner due to milder conditions late this week into the next.

Pivot points

According to Binary Tribune’s daily analysis for the next trading session, February natural gas futures’ central pivot point stands at $3.126. In case the contract penetrates the first resistance level at $3.229 per million British thermal units, it will encounter next resistance $3.330. If breached, upside movement may attempt to advance to $3.433 per mBtu.

If the energy source drops below its first support level at $3.025 per mBtu, it will next see support at $2.922. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.821 per mBtu.

In weekly terms, the central pivot point is at $3.087. The three key resistance levels are as follows: R1 – $3.392, R2 – $3.656, R3 – $3.961. The three key support levels are: S1 – $2.823, S2 – $2.518, S3 – $2.254.