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James Hyerczyk
Natural Gas

Natural gas futures gapped higher early Monday with prices hitting their highest level since September 18. In the process, the market crossed decisively to the strong side of a key retracement zone, while taking out last week’s high. Buyers are now likely setting their sights on the September 17 main top at $2.884.

At 06:15 GMT, December natural gas is trading $2.810, up $0.096 or +3.54%.

The gap opening was no surprise, but there was uncertainty about the direction ahead of the weekend. On Friday, NatGasWeather made a comment the mid-term outlook saying, “Demand was most notably added November 12-15 as the GFS favors another strong cold shot into the northern U.S.”

However, it also added that the outlook advertised in the European model Friday “just wasn’t as cold as the GFS. It still has three cold shots into the U.S. the next two weeks, but the one “lining up to arrive closer to mid-November “isn’t nearly as impressive with the amount of cold.”

Based on this assessment, NatGasWeather concluded this sets up “big risks over the weekend whether either the GFS” proves to be “much too cold or the European not nearly cold enough. We must expect a gap depending on which is more correct.”

The early price action suggests the latest forecasts have the U.S. Global Forecast System (GFS) and the European models lining up for intense cold.

“Brutally Cold Air Mass” Coming to Northeast

Zerohedge.com is saying, “An Arctic blast of cold air is likely to roll into the Mid-Atlantic and Northeast regions this coming week, possibly producing one of the first snowmaking weather events of the year by late week.”

“A very cold air mass for early November is poised to impact the Northeast late week into next weekend. A favorable upper atmospheric pattern should allow air from northern Canada to spill into the Great Lakes and Northeast. During this cold stretch, temperatures may average 10-20 degree F below normal for most of the Northeast, including the major cities. This may influence heating oil and natural gas demand, while allowing interior Northeast ski reports to begin making snow for the winter season ahead,” stated Ed Vallee, head meteorologist at Empire Weather LLC.

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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.

Daily December Natural Gas

Daily Forecast

Technically, the main trend is up according to the daily swing chart. The uptrend was reaffirmed early Monday with the gap through last week’s high at $2.738. The new main bottom is $2.575. A trade through this level will change the main trend to down. If the upside momentum continues then look for buyers to take a run at the September 17 main top at $2.884.

The main range is $2.884 to $2.388. Its 61.8% to 50% retracement zone at $2.695 to $2.636 is new support. This zone is controlling the near-term direction of the market.

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