Natural gas trading outlook: futures edge up to trim overnight losses

Natural gas gained on Tuesday to end three consecutive days of declines as forecasting agencies projected a colder end to the year.

On the New York Mercantile Exchange, natural gas for delivery in January gained 1.59% to $3.194 per million British thermal units by 10:26 GMT, having shifted in a daily range between $3.215 and $3.149 per mBtu. The energy source plunged 9.24% to $3.144 on Monday, but not before it reached $3.124, its lowest since January 2013.

According to NatGasWeather.com, US natural gas demand will be moderate compared to normal over the next seven days.

The Midwest will experience a period of rain and snow brought by a weather system moving through the region. Another weather system will form over the Southeast and later flow north to deliver heavy rains and strong winds to the East Coast. It is expected to leave behind only small accumulations of snow over the East Coast, with greater potential over the Great Lakes and interior Northeast.

A new weather system will crash into the Northwest early next week, NatGasWeather.com reported, marking the beginning of a series of strong cold winter blasts to the northern US.

Around New Years Eve another weather system of the series will also hit the central US, bringing rain, snow and sub-freezing temperatures. However, it is still unknown how far into the US these conditions will push, but it is certain that colder air will be arriving.

Temperatures over the southern US are expected to fluctuate as mild conditions arrive into the region, followed by colder weather systems.

Temperatures

According to AccuWeather.com, temperatures in New York on Wednesday will range between 56 and 58 degrees Fahrenheit, above the average of 30-41, before moderating to the seasonal 31-37 degrees on December 30th. Chicago will see readings of 30-39 degrees on December 24th, slightly above normal, with temperatures expected to fall 7 below normal on December 31st.

Down South, Texas City will experience colder-than-usual temperatures on December 24th, ranging between 42 and 55 degrees, before reaching 5 above normal on December 30th. On the West Coast, the high in Los Angeles on December 23rd will be 11 above the normal at 78 degrees. Temperatures will fluctuate through the end of December, with readings of 66 degrees on 25th and 62 on 31st.

Reserves

The Energy Information Administration said reported last week that US natural gas stockpiles fell by 64 billion cubic feet (bcf) in the week ended December 12th, exceeding analysts’ projections for a withdrawal of 57-63 bcf but also falling well behind the five-year average drop of 157 bcf.

Total gas held in US storage hubs amounted to 3.295 trillion cubic feet as of December 12th, scoring a 0.2% surplus to last year’s level of 3.289 trillion during the comparable period, but also narrowing its deficit to the five-year average of 3.553 trillion to 7.3%.

Due to last week’s mild weather, this week’s supplies withdrawal is expected to again be much thinner than the five-year average, with projections pointing to a 60-bcf draw, compared to the average of -138 bcf. The deficit to the five-year average is expected to further shrink next week, with early estimates hinting of another smaller-than-average inventory decline due to this week’s overall mild weather.

Pivot Points

According to Binary Tribune’s daily analysis, January natural gas futures’ central pivot point stands at $3.206. In case the contract penetrates the first resistance level at $3.289 per million British thermal units, it will encounter next resistance at $3.433. If breached, upside movement may attempt to advance to $3.516 per mBtu.

If the energy source drops below its first support level at $3.062 per mBtu, it will next see support at $2.979. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.835 per mBtu.

In weekly terms, the central pivot point is at $3.615. The three key resistance levels are as follows: R1 – $3.785, R2 – $4.107, R3 – $4.277. The three key support levels are: S1 – $3.293, S2 – $3.123, S3 – $2.801.