Natural gas trading outlook: futures ease on mixed weather

Natural gas fell after reaching the highest in 3-1/2 weeks on Thursday as forecasts called for mixed weather across the US in the coming couple of weeks, with another above-average weekly withdrawal expected to come in next Thursday.

Natural gas for delivery in February fell $0.073 to $3.085 per million British thermal units by 9:36 GMT, having varied in a daily range of $3.196-$3.064. The energy source slid 2.32% on Thursday to $3.158 after it touched an intra-day high of $3.352, the strongest level since December 22nd. Prices are up 4.3% for the week so far.

The Energy Information Administration reported yesterday that US natural gas inventories declined by 236 billion cubic feet in the week ended January 9th, compared to analysts’ projections for a decrease in the range of 220-230 bcf. The drop exceeded the five-year average draw of 190 bcf, while inventories slid by 268 bcf a year earlier.

Total gas held in US storage hubs amounted to 2.853 trillion cubic feet, expanding a deficit to the five-year average inventories of 2.966 trillion to 3.8% from 2.1% during the previous week, or 113 bcf. The surplus to the year-ago stockpiles level of 2.571 trillion cubic feet expanded to 11.0%.

Next week’s report is also projected to show an above-average weekly decline as the recent Arctic blasts are factored in. The EIA will likely report a withdrawal of more than 200 billion cubic feet, compared to the five-year average of -176 bcf and the 133-bcf drop during the comparable week a year earlier. However, the following one should be much thinner due to milder conditions late this week into the next.

Weather

According to NatGasWeather.com, natural gas demand in the US will be moderate compared to high through January 22nd, with a neutral to slightly-colder weather trend for the following seven days.

Cold Canadian air will continue to affect the Great Lakes and interior Northeast today before the regions warm up on Saturday. The rest of the US will remain quite mild, with temperatures over the South expected to range between the 50s and lower 70s.

Another brief blast of colder temperatures will hit the Midwest and Northeast on Sunday and Monday, but overall national temperatures through mid-next week will be above-normal, with morning readings set to top seasonal levels by 8-20 degrees Fahrenheit.

However, colder air will once again enter the northern US around January 22nd-23rd, NatGasWeather.com reported, but the most threatening Arctic air will likely be contained over Canada, inducing only a brief cold blast over the Great Lakes.

After the cold system leaves, mild temperatures will dominate the Midwest and Northeast between January 24th-26th, before another cold blast arrives, bearing the potential for much colder Arctic air to get tapped into the northern US around January 28th.

Temperatures

According to AccuWeather.com, readings in New York will range between 26 and 27 degrees on January 17th, below the average 27-38, before jumping to usual levels four days later. Chicago will enjoy seasonal and slightly warmer weather through January 21st, with readings set to range between 30 and 37 degrees tomorrow, but a following cooling will push the mercury down to as much as 6 degrees on January 24th.

Down South, Houston will hover above the seasonal 45-63 degrees through January 21st, followed by a 5-day period of colder-than-normal weather. On the West Coast, Los Angeles will see highs reach 77 degrees tomorrow, 9 above usual, with forecasts calling for warmer-than-normal weather through January 27th.

Pivot points

According to Binary Tribune’s daily analysis, February natural gas futures’ central pivot point stands at $3.189. In case the contract penetrates the first resistance level at $3.321 per million British thermal units, it will encounter next resistance $3.484. If breached, upside movement may attempt to advance to $3.616 per mBtu.

If the energy source drops below its first support level at $3.026 per mBtu, it will next see support at $2.894. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.731 per mBtu.