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James Hyerczyk
Natural Gas

Natural gas futures are inching lower early Friday as confusing weather forecasts continue to limit the price action in either direction. Traders received no help from yesterday’s government weekly storage report which came in lower than expected, but inside a wide range of estimates. The technical chart pattern this week suggests investor indecision. However, it also indicates impending volatility, which could mean a breakout move is coming once traders get some clarity.

At 06:02 GMT, January natural gas is trading $2.411, down $0.016 or -0.66%.

U.S. Energy Information Administration Weekly Storage Report

The EIA reported on Thursday a 19 Bcf pull for the week-ending November 29. Ahead of the report, estimates for the withdrawal ranged widely from a draw of just 8 Bcf to a draw of as much as 33 Bcf. Some traders said that last week’s U.S. Thanksgiving holiday week may have skewed the data.

Total stocks now stand at 3.591 trillion cubic feet, up 591 billion cubic feet from a year ago, but 9 billion cubic feet below the five-year average, the government said.

The EIA recorded a 62 Bcf withdrawal in the same week last year, and the five-year average stands at 42 Bcf.


Latest Weather Outlook

“The models remained starkly at odds, although the much milder European model added some demand to its outlook in the afternoon run. After the Global Forecast System (GFS) model trended colder midday in a rather bullish pattern December 11-18. It was of considerable interest to see what the afternoon European model would show since it’s been running nearly 35-40 heating degree days (HDD) milder comparatively,” according to NatGasWeather.

“The afternoon European model added 5-6 HDDs versus Wednesday night’s run, but only 1 HDD versus its run the previous 24 hours. As such, the difference between the European and the GFS models remain vast,” the forecaster said.

Production Flows Remain High

Production flow monitors suggest dry gas production may have broached 97 Bcf/d in the final days of November, EBW said. Recent measurements, however, suggest a mind-boggling 4.0 Bcf/d of incremental production from the September average to the end of November.

“Rising supplies heading into the winter have tilted a bearish outlook further in favor of shorts, and contributed to decisive losses in Nymex futures last week,” EBW said.

Daily Forecast

We’re likely to see more consolidation today as traders may be reluctant to take big positions ahead of the unpredictable weekend. The chart pattern suggests a gap opening is likely for Monday so be prepared for heightened volatility at the start of next week.

With weather likely to remain the most critical near-term variable, any further delayed signs of emerging cold will put pressure on prices.

Contrarily, Bespoke Weather services said, “Next week’s (EIA) number will be more interesting now, as it definitely sees some balance tightening showing up in the data, ‘enough so that any decent turn back colder can promote a rally back over $2.50 in prompt-month pricing rather easily, in our view.”

In reference to the lack of clarity in the weather forecasts, NatGasWeather said, “It should make for an interesting Friday ahead of what is going to be another very dangerous weekend to hold due to the potential for big weather trends.”

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