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James Hyerczyk
Natural Gas

Natural gas futures are trading slightly lower early Friday after posting a dramatic technical closing price reversal top on Thursday. If the chart pattern is confirmed later in the session the market could pullback another $0.06 to $0.10 over the near-term. The catalysts behind the price action was a bearish government storage report and a weak cash market.

At 06:41 GMT, December natural gas is trading $2.631, down $0.002 or -0.08%.

Lower cash markets across the board Thursday were partly responsible for the sell-off. Prices fell because of ample supply despite lingering chilly air across the central United States. The Natural Gas Intelligence (NGI) Spot Gas National Average fell 17.5 cents to $2.345.

Combined with the plunge in spot prices, the latest Energy Information Administration (EIA) storage report offered a further bearish impact that solidified the technical closing price reversal top and may have triggered the start of a near-term correction.

U.S. Energy Information Administration Weekly Storage Report

The EIA reported Thursday that domestic supplies of natural gas rose by 89 billion cubic feet for the week-ending October 25. The build came in on the high side of wide-ranging estimates between 66 Bcf and 94 Bcf, although most projections centered an 85 Bcf injection. The build was also higher than last year’s 49 Bcf injection and the 65 Bcf five-year average.

Total stocks now stand at 3.695 trillion cubic feet, up 559 billion cubic feet from a year ago and 52 billion cubic feet above the five-year average, the government said.


Short-Term Weather Outlook

According to NatGasWeather for October 31 to November 6, “Warm high pressure will continue across the eastern US for another day with highs of 60s to 80s, warmest over the Southeast. However, a cold front with rain and snow is tracking into the east-central US, reaching the East Friday. It remains frosty across much of the western and central US with lows of -0s to 30s, although gradually warming this weekend. A reinforcing cold shot will follow across the Midwest and Northeast this weekend, followed by a brief break early next week. However, another frigid cold shot will follow mid-next week. Overall, national demand will be increasing to high-very high.”

Daily December Natural Gas

Daily Forecast

The main range is $2.884 to $2.388. Its 50% to 61.8% retracement zone is $2.636 to $2.695. Trading on the weak side of this zone will indicate the presence of sellers. Consider this zone resistance unless buyers can overcome the upper level at $2.695. Overtaking $2.738 will indicate the buying is getting stronger and that traders have absorbed yesterday’s bearish EIA report.

The short-term range is $2.388 to $2.738. If sellers continue to hit the market, then look for a pullback into its retracement zone at $2.563 to $2.522. Since the main trend is up, buyers could come in on a test of this zone. This could help form a secondary higher bottom.

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