Natural gas touches 1-month lows on milder US weather outlook

Natural gas touched lows unseen in one month as the short-term weather forecasts called for a period of warmer weather conditions, after the recent record cold Arctic outbreak. Meanwhile, investors awaited the release of the EIAs weekly US gas inventories report, that may show larger than the 5-year average withdrawal in the week ended January 3rd.

On the New York Mercantile Exchange, natural gas for delivery in February declined by 1.16% to trade at $4.167 per million British thermal units by 09:29 GMT. Prices hit a session high at $4.188 per mBtu, while days low was touched at $4.155 per mBtu, the weakest level since December 8th. The energy source declined 0.4% in the last 5-day period, after losing 1.9% in the previous week. However, prices settled last year 26% higher, the best performance since 2005 and second straight annual advance.

Mild short-term weather forecasts

NatGasWeather.com reported on January 8th that the eastern US will see another day of rapidly warming temperatures in the wake of the recent record cold Arctic outbreak. An active weather pattern returns to the northwestern US, bringing a flatter west to east flow across the US. The latter will allow several weather systems to track across the country with areas of moderate to heavy rains or a wintry mix into the colder air.  

A fairly strong rainstorm will probably develop on Friday, leading to a wide area of moderate to heavy rains across much of the eastern US. Due to warm southerly flow and ahead of the rain storm, temperatures will be very mild, with highs reaching 50s and 60s in the Northeast and Mid-Atlantic and 70s in the Southeast.

Early next week a reinforcing shot of cold air will blast through the Midwest and into the Northeast. Several strong cold fronts will push through January 16-22nd, bringing a return to above normal natural gas and energy demand.

NatGasWeather.com’s extended forecasts for the week ended January 23rd, show the period of milder weather conditions will come to an end around the January 14th as several cold blasts sweep across the Midwest and into eastern US. The first two cold outbreaks wont be as impressive as the recent two that impacted the US, but according to the website the third one could be extremely cold. The outbreak may bring another round of below zero temperatures to much of the Midwest and Northeast, with hard freezes again deep into the Southeast. The weather pattern also supported fairly strong winter storms, developing over the south-central US and will then track through the Mid-Atlantic and Northeast. A very impressive cold outbreak over much of the eastern and central US around January 18-19th may bring a huge surge to natural gas and energy demand.

According to AccuWeather.com, readings in Detroit will reach 35 degrees Fahrenheit on January 10th, 15 above average, while the low in Chicago will hit 32 degrees, above the average of 18 degrees. Temperatures in Boston are expected to increase to 34 degrees Fahrenheit, 12 above normal.

EIA’s weekly US gas inventories report

Later today, EIA will release its weekly report on US gas inventories, which according to the median analysts’ estimates in a Bloomberg survey may show the gas inventories fell by 149 billion cubic feet in the week ended January 3rd. The five-year average withdrawal is 131 billion.

According to data by the EIA stockpiles declined by 22% in the prior seven weeks, reaching 2.974 trillion cubic feet, the lowest level since August.