Natural gas trading outlook: futures rise on cold short-term outlook

Natural gas rose for a second day on Monday as forecasts called for cold weather across the central and eastern US over the next several days, implying high demand for the heating fuel. Market players looked past this weekends expected warm-up for signs of new cold blasts.

Natural gas futures for settlement in December rose 3.33% to $4.154 per million British thermal units by 10:37 GMT, having shifted in a daily range of $4.188-$4.133. The energy source rose 1.08% on Friday to $4.020 but settled the week 9.1% lower, the largest weekly drop since February, pressured by extended forecasts predicting mild weather.

According to NatGasWeather.com, natural gas demand in the US will be high compared to normal during the next seven days, with a neutral to slightly colder weather trend for the November 23-29 span.

Temperatures over the central US will once again be pushed to 20-30 degrees Fahrenheit below normal on Monday as a fresh cold blast hits the region. It will also send overnight lows across Texas to between 10-20 degrees and the mid-20s for the Southeast on Tuesday. The new cold system will have a stronger effect on the Midwest and Northeast as opposed to last weeks blast, with lows falling into the teens.

However, a long awaited Pacific jet stream will infiltrate the western US on Friday, NatGasWeather.com said, carrying mild weather conditions. The stream will bring a series of weather systems that will track across most of the US, allowing readings to moderate to normal and slightly above normal over most of the country this weekend, significantly reducing national heating demand.

The following weather systems may turn colder, with periods of rain and snow, and may lead to seasonal or slightly lower temperatures during the Thanksgiving week, particularly around November 28-29. The western parts of the country, nevertheless, are expected to remain warmer than normal.

Temperatures

According to AccuWeather.com, readings in New York on Tuesday will range between 26 and 34 degrees Fahrenheit, well below the average of 41-53, before jumping to the above-seasonal 54-65 degrees on November 24th. Chicago will range between 17 and 18 degrees tomorrow, compared to the average of 34-47, but will reach the above-seasonal 41-48 degrees on November 23rd.

Down South, Houston will max out at 51 degrees on Tuesday, 19 beneath normal, before surging to 73 degrees on Friday. On the West Coast, Los Angeles will reach 83 degrees the same day, compared to the average of 72, and is expected to hold mostly at or little above seasonal levels through November 28th.

Supplies

The Energy Information Administration reported on Friday that US natural gas inventories rose by 40 billion cubic feet (bcf) in the seven days ended November 7th. This compared to analysts’ projections for a jump of around 36 bcf and exceeded both the five-year average and year-ago gains of 16 bcf and 22 bcf, respectively.

Total gas held in US storage stood at 3.611 trillion cubic feet, narrowing its deficit to the five-year average of 3.848 trillion to 6.2%. Inventories were 5.7% lower compared to last year’s 3.831 trillion cubic feet during the comparable period.

Due to last weeks much colder than usual weather, this Thursdays EIA report is expected to show the first weekly withdrawal since the beginning of the replenishment season in April. Market players will keep a close eye on forecast developments beyond this weekends warm-up, especially for the beginning of Decembers yet unclear data, for initial estimates on inventory numbers.

Pivot points

According to Binary Tribune’s daily analysis for Monday, December natural gas futures’ central pivot point stands at $4.008. In case the contract penetrates the first resistance level at $4.086 per million British thermal units, it will encounter next resistance at $4.151. If breached, upside movement may attempt to advance to $4.229 per mBtu.

If the energy source drops below its first support level at $3.943 per mBtu, it will next see support at $3.865. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.800 per mBtu.

In weekly terms, the central pivot point is at $4.165. The three key resistance levels are as follows: R1 – $4.399, R2 – $4.778, R3 – $5.012. The three key support levels are: S1 – $3.786, S2 – $3.552, S3 – $3.173.