Natural gas trading outlook: futures rise on projections for colder upcoming weather

Natural gas gained for a second session in three on Tuesday as forecasts predicted a colder end of the year.

On the New York Mercantile Exchange, natural gas for delivery in January rose 1.18% to $3.763 per million British thermal units by 9:26 GMT, having shifted in a daily range between $3.789 and $3.720 per mBtu. The energy source settled 2% lower at $3.719 on Monday, but not before it edged up to $3.936, the highest since December 2nd.

According to NatGasWeather.com, US natural gas demand will be moderate, potentially becoming high, compared to normal through December 22nd, with a colder weather trend for the following seven days.

A weather system will maintain its presence over the eastern US for a few more days, with areas of snow, rain and overall temperatures below normal. Readings in the southern US are projected to range between 55-75 degrees as built up high pressure dominates the region.

Colder weather systems are expected to arrive over the Midwest early next week, NatGasWeather.com reported. Around next Wednesday a strong weather system will move across the central and eastern US, bringing areas of rain and snow accumulations, but it is still unknown how much cold Canadian air will be released by that system.

Colder weather systems are expected to keep arriving into the US through the rest of the year, especially over the north-central and eastern US. Meanwhile, the West Coast will be dry as high pressure takes over the region, with the exception of the interior West, where temperatures could turn quite chilly due to cold Canadian air pushing through.

Temperatures

According to AccuWeather.com, temperatures in New York on Wednesday will range between 34 and 51 degrees Fahrenheit, above the average of 32-42, before sliding to 34-39 degrees on December 23rd. Chicago will see lows drop to 25 degrees on December 18th, 3 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 58 and 62 degrees, with no major trend shifts expected through the end of the month. On the West Coast, the high in Los Angeles on December 17th will be 62 degrees, 5 beneath the average. Temperatures will warm up to 72 degrees on December 25th before moderating to seasonal levels through the rest of December.

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 year’s 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 week’s mild weather, EIA’s next report, due this Thursday, is expected to show a significantly smaller draw of around 55-60 bcf compared to the 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 $3.785. In case the contract penetrates the first resistance level at $3.870 per million British thermal units, it will encounter next resistance at $4.022. If breached, upside movement may attempt to advance to $4.107 per mBtu.

If the energy source drops below its first support level at $3.633 per mBtu, it will next see support at $3.548. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.396 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.