Natural gas trading outlook: futures edge higher on colder end to December

Natural gas extended Fridays hefty gains as weather patterns for the end of the month continued to trend colder during the weekend, providing support after recent bearish headwinds.

On the New York Mercantile Exchange, natural gas for delivery in January rose 2.48% to $3.889 per million British thermal units by 8:13 GMT, having shifted in a daily range between $3.936, the highest since December 2nd, and $3.880 per mBtu. The energy source settled 4.4% higher at $3.795 on Friday.

According to NatGasWeather.com, US natural gas demand will be moderate compared to normal through December 20th, with a colder weather trend for the following seven days.

Temperatures across the northern and central regions of the country are expected to be seasonal through this weekend, while conditions over the southeastern US remain mild with highs in the 60s and 70s.

However, extended forecasts showed numerous weather systems will enter the central and eastern US around the Christmas Holiday, all bearing the potential to tap cold Canadian air. Although it remains unclear how much of that air will be brought over the US, it will probably become colder than usual across the east-central US.

“It will be getting colder over the Midwest and eastern US, potentially significantly so, but the weather data could be more convincing and consistent on how it plays out” NatGasWeather.com analysts said in an e-mailed note to clients.

Moreover, Bloomberg reported, citing Commodity Weather Group LLC, that January is expected to be colder than average. According to the Energy Information Administration, 49% of US households use natural gas for heating.

Temperatures

According to AccuWeather.com, temperatures in New York on Tuesday will range between 41 and 47 degrees Fahrenheit, above the average of 32-43, before sliding to 28-38 degrees on December 22nd. Chicago will see lows drop to 24 degrees on December 17th, 2 above usual, and is expected to remain mostly seasonal or a bit warmer through December 27th.

Down South, Texas City will enjoy seasonal weather tomorrow with readings ranging between 51 and 65 degrees, with no major trend shifts expected through the end of the month. On the West Coast, the high in Los Angeles between December 16th and December 19th will be 64 degrees, 3 beneath the average. Temperatures will warm up to 70 degrees on December 24th before retreating to as much as 58 degrees on December 27th, 10 below normal.

Supplies

The Energy Information Administration reported on Thursday that US natural gas stockpiles slid by 51 billion cubic feet in the week ended December 5th, exceeding analysts estimates for a drop of 45 billion cubic feet but also trailing the five-year average withdrawal of 71 bcf.

Total gas held in US storage hubs stood at 3.359 trillion cubic feet which was 5.2% below last years 3.545 trillion and narrowed its deficit to five-year average levels to 9.5% from 9.8% during the preceding week.

Due to last weeks mild weather, EIAs next report, due this Thursday, is expected to show a significantly smaller draw than the five-year average, which would help further trim deficits. However, the likely bearish stockpiles report might be overshadowed by bullish weather data, given the cold blasts that are projected to arrive to the northern US next week.

Pivot points

According to Binary Tribune’s daily analysis, January natural gas futures’ central pivot point stands at $3.755. In case the contract penetrates the first resistance level at $3.866 per million British thermal units, it will encounter next resistance at $3.937. If breached, upside movement may attempt to advance to 4.048 per mBtu.

If the energy source drops below its first support level at $3.684 per mBtu, it will next see support at $3.573. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.502 per mBtu.

In weekly terms, the central pivot point is at $3.735. The three key resistance levels are as follows: R1 – $3.885, R2 – $3.976, R3 – $4.126. The three key support levels are: S1 – $3.644, S2 – $3.494, S3 – $3.403.