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James Hyerczyk
Natural Gas

Natural gas futures are trading lower on Friday with the market continuing to straddle a key technical level on the daily chart that could determine the near-term direction of the market. Natural Gas Intelligence (NGI) is saying divergent weather models are moving toward a middle ground on the temperature outlook for later this month, driving prices sideways to lower.

At 14:58 GMT, January natural gas is trading $2.700, down 0.019 or -0.70%.

US, European Models Moving Toward Middle Ground

The major weather models came into better agreement overnight, with the colder American model “showing much less cold” and the European model shifting toward a chiller outlook, according to Bespoke Weather Services.

After the American model had been roughly 30 gas-weighted degree days colder than the European previously, “we felt the answer likely was in the middle, which is now where the model consensus sits,” the forecaster said. “An interesting theme in the modeling is a subtle trend toward more emphasis again on the Pacific side of the pattern as the main driver, and a little less on the Atlantic side.”

“This still keeps the late month pattern very tricky, but if blocking winds up weaker on the Atlantic side, the projected shift in tropical forcing might more easily bring about some warming into early December. That is beyond the 15-day modeling, however, so confidence is lower for now.”


U.S. Energy Information Administration Weekly Storage Report

On Thursday, the EIA reported a 3 Bcf injection into U.S. natural gas stocks for the week-ended November 8, extending the refill season. The 3 Bcf build was on the higher side of the consensus, but bullish versus the historical comparisons, as last year the EIA recorded a 42 Bcf injection for the period, and the five-year average is a 30 Bcf build.

Short-Term Weather Outlook

According to NatGasWeather for the week-ending November 15 to November 21, “A reinforcing cold shot will sweep across the Great Lakes and Northeast Friday through Sunday with chilly lows of 10s to 30s. A second milder system brings heavy showers to the Southeast with lows of 30s and 40s. The Western and central US will be mild with highs of 50s to 80s, coolest in the Northwest. A weather system will track across the East/Southeast early next week, just not a very cold one. Mild conditions will cover the rest of the US early next week with much lighter national demand. A stronger cold shot is expected into the northern US late last week. Overall, high national demand through Sunday, then moderate early next week.

Daily January Natural Gas

Daily Forecast

The early price action suggests the direction of the January natural gas market the rest of the session on Friday is likely to be determined by trader reaction to $2.696.

A sustained move under $2.696 will indicate the selling pressure is increasing. Overcoming $2.696, but failing at $2.750 will signal a neutral market. Look for an upside bias to develop on a sustained move over $2.750.

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