Natural gas trading outlook: futures swing back to losses after a brief interruption

Natural gas fell for a third session out of four on Thursday, despite weather agencies warnings for a colder end of the year.

On the New York Mercantile Exchange, natural gas for delivery in January fell 0.35% to $3.689 per million British thermal units by 9:48 GMT, having shifted in a daily range between $3.715 and $3.671 per mBtu. The energy source settled 2.29% higher at $3.702 on Wednesday, snapping a two-day loss streak.

According to NatGasWeather.com, US natural gas demand will be moderate, compared to normal, through December 24th, with a colder weather trend for the following seven days.

Several additional Pacific weather systems will move through the southern US during the weekend with rain accompanied by readings slightly below normal. Another weather system will develop over Texas tomorrow, carrying heavy showers and eventually flowing into the Southeast.

A powerful winter storm with snow accumulations and very strong winds is projected to form over the the central and eastern US by Christmas Eve, NatGasWeather.com reported.

Another strong winter storm is expected to bring sub-freezing temperatures late next week over the Great Lakes and Northeast. An even more significant cold blast will follow on Christmas Day and push freezing temperatures deep into the south-central US.

Southwest and northeast corners excluded, the US will be affected by below-normal temperatures for the rest of the year.

Temperatures

According to AccuWeather.com, temperatures in New York on Friday will range between 30 and 40 degrees Fahrenheit, below the average of 31-42, before climbing to 43-48 degrees on December 23rd. Chicago will see readings of 28-31 degrees on December 19th, and is expected to remain mostly seasonal or a bit warmer through December 26th, with temperatures set to fall 10 degrees below normal through the end of the year.

Down South, Texas City will enjoy warmer-than-usual weather tomorrow ranging between 49 and 68 degrees, with no major trend shifts expected until December 25th when readings will moderate to seasonal for the rest of the month. On the West Coast, the high in Los Angeles on December 19th will be 65 degrees, 2 beneath the average. Temperatures will warm up to 76 degrees on December 24th before easing to seasonal levels through the rest of December.

Supplies

The Energy Information Administration reported last 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 report, due later today, is expected to show a significantly smaller draw of around 57-63 bcf compared to the the five-year average of 157 bcf, 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.

Pivot Points

According to Binary Tribune’s daily analysis, January natural gas futures’ central pivot point stands at $3.680. In case the contract penetrates the first resistance level at $3.746 per million British thermal units, it will encounter next resistance at $3.790. If breached, upside movement may attempt to advance to $3.856 per mBtu.

If the energy source drops below its first support level at $3.636 per mBtu, it will next see support at $3.570. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.526 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.