Natural gas trading outlook: futures slide after biggest gain in nine months

Natural gas retreated after posting its biggest daily advance since February 19th as weather forecasts called for Arctic temperatures across major US consuming areas this week, with another cold pattern set to unfold in the beginning of December.

Natural gas for delivery in December traded at $4.270 per million British thermal units at 10:16 GMT, down 1.64% on the day. Prices ranged between $4.327 and $4.258. The contract surged 7.99% on Monday to $4.341, having hit a one-week intraday high of $4.347 per mBtu.

According to NatGasWeather.com, natural gas demand in the US will be high compared to normal in the next seven days, with a neutral weather trend for the November 25 – December 1 span.

The central and eastern US will be dominated by Arctic conditions today, with readings plunging 18-30 degrees Fahrenheit below normal. The Midwest and Northeast will see temperatures drop into the lower teens, inducing very high early season heating demand. Moreover, the cold wave will also extend deep into the Southeast during the next few days but temperatures over Texas and the Plains will begin to gradually warm up today.

The Arctic readings will loosen their grip at the end of the week and give way to milder conditions as a Pacific jet stream enters into the western US on Friday, NatGasWeather.com reported, allowing for mostly seasonal temperatures to return across most of the US during the weekend.

Next week, the western US will continue to enjoy seasonal or slightly higher readings. However, the central and eastern US will see a large number of weather systems with rain and snow that will lead to below-average temperatures between November 27th and December 1st, including over the Southeast.

Temperatures

According to AccuWeather.com, readings in New York on November 21st will range between 31 and 39 degrees Fahrenheit, well below the average of 40-52, and will be below-normal at 35-43 six days later. Chicago will max out at 23 degrees on November 20th, compared to the average of 46, and will range between 28 and 35 degrees on November 26th.

Down South, the high in Houston on Friday will be 74 degrees, 3 above usual, before falling to 60 degrees on November 26th, 9 beneath normal. On the West Coast, Los Angeles will reach the seasonal 72 degrees tomorrow and is expected to hold mostly at or little above seasonal levels through the end of the month.

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. 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 week’s much colder than usual weather, this Thursday’s EIA report is expected to show the first weekly withdrawal since the beginning of the replenishment season in April. Analysts early estimates ranged between a draw of 6 to 18 billion cubic feet, compared to the five-year average decline of 10 bcf.

Moreover, this weeks impressive Arctic blast is projected to lead to a significant draw for next weeks report. Tim Evans, an energy analyst at Citi Futures, said, cited by Bloomberg, that he expects the November 27th report to show a 130-bcf decline in US natural gas stockpiles.

Pivot points

According to Binary Tribune’s daily analysis, December natural gas futures’ central pivot point stands at $4.267. In case the contract penetrates the first resistance level at $4.421 per million British thermal units, it will encounter next resistance at $4.501. If breached, upside movement may attempt to advance to $4.655 per mBtu.

If the energy source drops below its first support level at $4.187 per mBtu, it will next see support at $4.033. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.953 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.