Forecasts for the return of cold weather after the current warm spell are helping to drive natural gas futures higher early Monday.
At 0849 GMT, January natural gas futures are trading at $3.098, up $0.037 or +1.21%.
According to NatGasWeather.com, “Frigid temperatures will sweep across the country this week, putting much of the nation well below normal with stronger than normal demand by Wednesday to Thursday. Additional cold blasts will continue through December 15th. The northern U.S. is likely to remain quite cold well through mid-December.”
“Overall, demand will be low through Monday, then rapidly increase to high.”
In other news, according to the U.S. Energy Information Administration, natural gas storage in the U.S. fell by 33 billion cubic feet (bcf) in the week-ended November 24, compared to forecasts for a withdrawal of 37 bcf.
That compared with a drop of 46 bcf in the preceding week, a fall of 50 bcf a year earlier and a five-year average decline of 47 bcf.
Total natural gas in storage currently stands at 3.693 trillion cubic feet (tcf), according to the EIA. That figure is 309 bcf, or around 7.7%, lower than levels at this time a year ago and 107 bcf, or roughly 2.8%, below the five-year average for this time of year.
Forecast
The weather forecast should be supportive this week. However, the daily chart pattern is still indicating a sideways market.
Holding inside a pair of 50% levels at $3.112 and $3.061 will indicate investor indecision.
A sustained move over $3.112 will indicate the return of buyers. This could lead to a test of the Fibonacci level at $3.161. Overcoming this level will indicate the buying is getting stronger with the next target, last week’s high at $3.218. Taking out this level with conviction could generate the momentum needed to challenge last month’s high at $3.321.
A sustained move under $3.061 will signal the presence of sellers. This could trigger a move into the Fibonacci level at $3.023. If this level fails then we could see another wash-out to the downside.
If you don’t want to deal with a possible two-sided trade then watch for increased buying over $3.161 and increased selling under $3.023.