Natural gas trading outlook: futures extend drop on mild weather

Natural gas fell for a third day on Tuesday as forecasts called for mostly warmer-than-usual weather across the US this week, with no threats for significantly colder conditions for the following seven days.

On the New York Mercantile Exchange, natural gas futures for delivery in February were down 4.41% at $2.989 per million British thermal units by 9:52 GMT, having shifted in a daily range of $3.045-$2.951.

According to NatGasWeater.com, natural gas demand in the US will be moderate compared to normal through January 26th, with a neutral weather trend for the following seven days.

The majority of the US will enjoy warmer-than-normal temperatures this week, which will push national heating demand to lower than usual for this time of the year. A number of weather systems will track across the US in the next days, carrying snow and slightly lower-than-normal temperatures. However, and most importantly, the frigid Arctic air lurking around the Canadian border will remain contained within southern Canada, allowing for most of the US to remain mild.

Morning lows will continue to be warmer than usual for most of the country for the rest of the week, but will ease as the week progresses, especially over the East and South. A notable system will track across Texas on Wednesday and then head into the Southeast, followed by another system that will push deep into the Southeast during the weekend, carrying lower-than-average readings.

Early next week, weather systems tracking across the Midwest and eastern US will bring rain, snow and slightly cooler-than-usual temperatures, but with the coldest Arctic air failing to push deep into the country, the western, central, and southern US will remain near or warmer than normal.

“There will continue to be weather systems tracking across the northern US January 29th – February 2nd that will attempt to tap extremely cold Arctic air, but the data continues to show it won’t be easy for the cold to cross into the US and is likely to only graze the upper Midwest and Northeast with frigid temperatures,” NatGasWeather.com said.

Temperatures

According to AccuWeather.com, readings in New York will range between 26 and 38 degrees on January 23rd, compared to the average 27-38, and will remain close to normal levels through January 26th. Chicago will enjoy mostly seasonal weather through January 24th, with readings on January 22nd set to range between 24 and 30 degrees Fahrenheit, compared to the average 18-31.

Down South, temperatures in Houston will max out at 73 degrees today, 10 above normal, before retreating to 56 degrees two days later and then hovering around seasonal levels through the end of the month. On the West Coast, Los Angeles will be warmer than usual for the remaining portion of the month, with readings set to range between 55 and 78 degrees on January 24th, compared to the average 48-68.

Supplies

The Energy Information Administration reported last Thursday 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%.

This 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 the seasonal conditions this week.