Natural gas trading outlook: futures advance on Northeast blizzard

Natural gas pared overnight losses on Tuesday amid speculation that frigid weather across the Northeast will induce heavy local heating demand. Gains, however, were limited as the rest of the US remains mostly warmer-than-usual.

Natural gas for delivery in March traded 3.62% higher at $2.951 per million British thermal units at 9:22 GMT. Prices shifted in a daily range of $2.955-$2.853 per mBtu. The contract fell 3.72% on Monday to $2.848. Prices have fallen in eight out of the last nine weeks.

According to NatGasWeather.com, natural gas demand in the US will be moderate compared to normal through February 2nd, with a slightly warmer weather trend for the following seven days, apart from the Northeast where colder conditions will dominate.

A strong Noreaster will hit the New England coast today with heavy snow and strong winds, driving significant heating demand across the Northeast as temperatures behind the cold front slide to 10-15 degrees Fahrenheit below normal. The National Weather Service warned that New York and Boston may get as much as 24 inches (60 centimeters) of snow.

However, warmer-than-usual readings will dominate the rest of the US, NatGasWeather.com reported, with a few exceptions. Weather systems tracking over southern California and the Southwest will carry rains and snow, but highs across Texas and the Southern Plains will remain in the mid 70s for several more days.

Late this week, and extending into the next, blasts of frigid Arctic air will impact the Great Lakes and Northeast, inducing high local heating demand. However, the coldest air will likely fail to push deeper, leaving the rest of the US near or warmer-than-usual through the first ten days of February.

Temperatures

According to AccuWeather.com, the low in New York on January 30th will be 8 degrees Fahrenheit, 19 below usual, and readings will range between 6 and 20 degrees on February 3rd, compared to the average 27-39. A warm-up to above-seasonal levels is expected after February 7th.

Boston will range between 7 and 16 degrees on January 31st, compared to the usual 22-36, before dropping to 3-11 degrees three days later. Chicago will enjoy warmer-than-usual weather on January 29th at 18-35 degrees.

Down South, the high in Houston on January 28th will be 74 degrees, 10 above the average, before easing to seasonal levels two days later. On the West Coast, Los Angeles will see readings peak at 73 degrees on January 29th, 5 above usual, with temperatures set to max out in the low and mid 70s through the first ten days of February.

Supplies

The EIA reported last Thursday that US natural gas inventories fell by 216 billion cubic feet in the seven days through January 16th, compared to analysts’ projections for a drop in the range of 220-230 bcf. Total gas held in US storage hubs amounted to 2.637 trillion cubic feet, expanding the deficit to the five-year average of 2.790 trillion to 5.5% from 3.8% during the previous period. The surplus to the year-ago stockpile level of 2.438 trillion cubic feet narrowed to 8.2% from 11.0% a week earlier.

This week’s report is expected to reflect a much thinner inventory withdrawal that would bring deficits to ~100 bcf once again as the recent overall mild conditions across the US get factored in. Early estimates called for a draw of 100-110 bcf, compared to the five-year average decline for the week at -168 billion cubic feet, while inventories fell by 219 bcf during the comparable period last year.

Pivot points

According to Binary Tribune’s daily analysis, March natural gas futures’ central pivot point stands at $2.862. In case the contract penetrates the first resistance level at $2.915 per million British thermal units, it will encounter next resistance $2.981. If breached, upside movement may attempt to advance to $3.034 per mBtu.

If the energy source drops below its first support level at $2.796 per mBtu, it will next see support at $2.743. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.677 per mBtu.