Natural gas trading outlook: futures extend losses on mild weather outlook

Natural gas fell for a fifth consecutive session and reached a new low as forecasts bring news of milder weather over the majority of the US.

Natural gas for delivery in January lost 0.80% to $3.843 per million British thermal units by 9:50 GMT. Prices held in a daily range between $3.866 and $3.830, its lowest since October 30. The energy source settled 3.32% lower on Tuesday at $3.874.

According to NatGasWeather.com, natural gas demand in the US over the next seven days will be moderate, compared to normal, with a slightly warmer trend for the December 10 – December 16 period.

During the past few days a cold blast of northern Canadian air flew into the central US, northern Texas included, but now is on its way north as a milder weather system moves through the western US. Cold Canadian air will hold its grip over the Great Lakes and New England during the next couple of days but the flow wont reach far from the border.

Rain and snow showers, with somewhat colder-than-normal temperatures are expected today over the eastern US, brought by a weak weather system. Over the next three days, temperatures across the southern US are projected to become warmer than normal, and mild to cool over the northern US. Heating demand will be below past weeks volumes as the majority of the US will enjoy above-seasonal temperatures.

By next Wednesday rain and snowfall will take over the Great Lakes and the Northeast, accompanied by normal or slightly-below-normal temperatures. During the next weekend, waves of moist Pacific weather systems are expected to move through the country starting west and heading east, bringing milder weather with them.

Temperatures

According to AccuWeather.com, temperatures in New York on December 3rd will range between 37 and 53 degrees, compared to the average of 36-47, before reaching the above-seasonal 45-52 on December 8th. Chicago will see readings of 32-33 degrees on December 4th, before increasing to the slightly-above-normal 39 degrees on December 9th.

Down South, the high in Texas City on December 3rd will be 72 degrees, 6 above normal, before sliding to 47-56 degrees on December 10th. On the West Coast, today’s temperature in Los Angeles will peak at 71 degrees, 2 above usual, with temperatures set to range between 72-76 degrees between December 6th and December 11th.

Supplies

Data by the EIA showed last week that US natural gas stockpiles declined by 162 billion cubic feet in the seven days through November 21st. This exceeded analysts’ expectations for a draw of 150 billion cubic feet, while the five-year average decline for the period was 6 bcf.

Total gas held in US storage hubs slid to 3.432 trillion cubic feet, widening its deficit to the five-year average of 3.832 trillion to 10.4% from 6.4% during the previous week. Stockpiles were also 9.2% below year-ago levels of 3.778 trillion.

According to NatGasWeather.com, this weeks report is projected to show a fall in reserves by 25 to 30 bcf. However, there is a wide range of estimates, some as high as 50 bcf, which would be in line with the five-year average. Last year stockpiles dropped 141 bcf during the comparable period.

Pivot Points

According to Binary Tribune’s daily analysis, January natural gas futures’ central pivot point stands at $3.919. In case the contract penetrates the first resistance level at $3.981 per million British thermal units, it will encounter next resistance at $4.089. If breached, upside movement may attempt to advance to $4.151 per mBtu.

If the energy source drops below its first support level at $3.811 per mBtu, it will next see support at $3.749. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.641 per mBtu.

In weekly terms, the central pivot point is at $4.231. The three key resistance levels are as follows: R1 – $4.382, R2 – $4.681, R3 – $4.832. The three key support levels are: S1 – $3.932, S2 – $3.781, S3 – $3.482.