Natural gas trading outlook: futures extend gains on incoming freezing temperatures

Natural gas rose for a seventh day and pushed above $4.2 as strong heating demand is expected in the Midwest and Northeast due to arctic air flows from Canada.

On the New York Mercantile Exchange, natural gas for delivery in December gained 2.03% to $4.213 per million British thermal units by 10:02 GMT. Prices ranged between $4.219, the highest since early-July, and $4.132. The contract edged up 2.05% on Tuesday to 4.129 per mBtu, following a 4.73% gain through last week, its biggest weekly increase since February.

According to NatGasWeather.com, natural gas demand in the US over the next seven days will become high, compared to normal, with a slightly colder weather trend for the November 12-18 time span.

The eastern U.S. will enjoy comfortable temperatures reaching into the 60s and 70s over most areas on Wednesday and Thursday, while rains will affect Texas and the upper Great Lakes. Late this week, however, on Friday and the weekend, the Midwest and eastern U.S. will suffer from a weather system that brings near or sub-freezing temperatures, rains and snowfall. Cool weather and possible rains will push through the southern U.S. this weekend, but wont be as bad as last weekend.

Early next week, a blast of arctic air over southern Canada will move into the Midwest and Northeast, which will increase heating demand in the region. The arctic air will bring well below freezing temperatures over the area and may affect other regions, although it is uncertain how far it will push into the U.S.

The southern U.S. will be mild, while the western parts of the country remain dry and warm as high pressure dominates. Additional weather systems are expected after November 15th.

Temperatures

According to AccuWeather.com, readings in New York on November 9th will range between 42 and 52 degrees Fahrenheit, below the average of 44-56, before dropping to 40-48 degrees three days later. Chicago will slide to 32 degrees on November 8th, 6 below usual, and will range between 26-43 degrees on November 15th.

Down South, temperatures in Houston will max out at 76 degrees on November 10th, 2 above normal, before falling to 63 degrees on November 13th. On the West Coast, the high in Los Angeles on November 6th will be 86 degrees, 11 higher than normal, before dropping to as much as 72-75 degrees on November 12-13.

Supplies

The Energy Information Administration reported last Thursday that US natural gas inventories rose by 87 billion cubic feet in the week ended October 24th, sharply exceeding the five-year average increase of 59 bcf and the 45-bcf gain during the comparable period a year ago. Analysts had projected an 85-bcf jump.

Total gas held in US storage stood at 3.480 trillion cubic feet, narrowing the deficit to the five-year average to 8.2%, compared to 9.1% a week earlier. Inventories were 7.8% below the 3.774 trillion cubic feet of gas held in storage a year ago.

The EIA is expected to report a build of around 80-90 bcf this Thursday, compared to the five-year average net injection of 42 billion cubic feet, while inventories rose by 35 bcf during the comparable period a year earlier. If confirmed, this would be seen as quite bearish. Support is expected to be drawn by weather data.

Pivot Points

According to Binary Tribune’s daily analysis, December natural gas futures’ central pivot point stands at $4.112. In case the contract penetrates the first resistance level at $4.196 per million British thermal units, it will encounter next resistance at $4.262. If breached, upside movement may attempt to advance to $4.346 per mBtu.

If the energy source drops below its first support level at $4.046 per mBtu, it will next see support at $3.962. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.896 per mBtu.

In weekly terms, the central pivot point is at $3.816. The three key resistance levels are as follows: R1 – $4.012, R2 – $4.151, R3 – $4.347. The three key support levels are: S1 – $3.677, S2 – $3.481, S3 – $3.342.