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James Hyerczyk
Natural Gas

Natural gas futures are trading higher on Friday shortly before the regular session opening. There was no follow-through to the downside following yesterday’s steep break, which suggests traders are taking protection against the possibility of a surge in demand over the weekend.

On Thursday, prices plunged after potential gains from a bullish U.S. weekly storage report were offset by a milder forecast.

At 12:03 GMT, December natural gas is trading $2.808, up $0.036 or +1.30%.

U.S. Energy Information Administration Weekly Storage Report

The EIA reported Thursday that domestic supplies of natural gas rose 34 billion cubic feet for the week-ended November 1. That was below the expected build of 46 Bcf.

Total stocks now stand at 3.729 trillion cubic feet, up 530 billion cubic feet from a year ago and 29 billion cubic feet above the five-year average, the government said.


Short-Term Weather Outlook

According to NatGasWeather for November 8 to November 14, “A cold front will exit the East today with chilly conditions left in its wake where lows will reach the 0s to 30s the next few mornings besides the Southwest and portions of the far southern U.S. A brief break is expected across the Midwest, Ohio Valley, and Northeast late this weekend where highs will warm into the 40s and 50s for lighter demand. However, a frigid Arctic blast remains on track to arrive next week east of the Rockies with very cold air and lows of -0s to 30s, including teens to 30s into Texas and the South. A second cold shot will follow across the Northeast late next week. The West will be mild to warm due to high pressure. Overall, high demand becoming very high next week.”

Daily December Natural Gas

Daily Forecast

The EIA report was bullish. The change in the forecast was slightly bearish with NatGasWeather saying, “However, the frigid cold pool is favored to retreat into Canada November 19-22, thereby being too far north to be tapped by U.S. weather systems, which is also what the overnight European model favored.”

This leads us to believe that the tone in the market over the short-run could be neutral.

Bespoke Weather Services tends to support this assessment. They “had cautioned that the rally following EIA’s report could find sellers without colder-trending guidance to back it up.” Natural Gas Intelligence is reporting that Bespoke “pointed to a drop in production, stronger power burns and higher liquefied natural gas (LNG) feed gas demand as drivers of the tighter week/week balances reflected in the latest storage stats.”

“For these reasons, we still consider it rather neutral” despite the number coming in bullish to market expectations, Bespoke said.

The daily chart indicates that downside pressure could drive the market into a retracement zone at $2.740 to $2.701. Holding inside this zone will support the neutral assessment.

If $2.701 fails as support then look for the selling to possibly extend into the major retracement zone at $2.647 to $2.585.

A test of either of these zones could attract buyers since the main trend is up. The trend will change to down on a trade through $2.575.

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