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James Hyerczyk
Natural Gas

Natural gas futures finished higher last week after gapping higher on Monday. Early in the week, the market hit its highest level since the week-ending May 31, however, the buying quickly dried up and prices retreated late in the week. However, buyers were able to prevent the gap from being filled and the market from turning lower for the week.

The late-in-the-week price action suggests traders were a little reluctant to commit in a big way to either side of the market ahead of the weekend. This is due to the uncertainty of the forecasts over the weekend. Recent changes in the forecast over the weekend have led to two consecutive gap-higher openings on Mondays. Traders are anticipating another gap-opening this Monday.

NatGasWeather said on Friday, “…There are big risks again holding this weekend as there’s likely to be a gap in prices depending on temperature trends for November 18-25. The GFS might have lost a little too much demand this run, but if it didn’t, or if it were to trend further milder, a gap lower should be expected.”

Last week, December natural gas settled at $2.789, up $0.075 or +2.76%.

Short-Term Weather Outlook

“A cold front was expected to exit the East on Friday, leaving chilly temperatures behind, including lows from the single digits to the 30s across much of the Lower 48 aside from the Southwest, according to NatGasWeather.

According to Natural Gas Intelligence (NGI), “The forecaster (NatGasWeather) called for the Midwest, Ohio Valley and Northeast to see a “brief break” in the cold temperatures late in the weekend, with highs climbing into the 40s and 50s, resulting in lighter demand.”

“However, a frigid Arctic blast remains on track to arrive” during the upcoming week, impacting areas “east of the Rockies with very cold air and lows” ranging from below zero to the 30s, including lows in the teens to 30s for Texas and the southern United States, NatGasWeather said. “A second cold shot will follow across the Northeast” late in the week ahead. “The West will be mild to warm due to high pressure.”


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.

Additionally, the United States injected a near-record amount of natural gas during the April 1-October 31 period, according to the EIA.

The pace of injections enabled inventories to rebound from a relatively low 1,155 Bcf at the start of April to an end-October carryout of 3,724 Bcf, the agency said in a research note Friday.

“From April 1 through October 31, more than 2,569 Bcf of natural gas was placed into storage in the Lower 48 states,” EIA said. “This volume was the second-highest net injected volume for the injection season, falling short of the record 2,727 Bcf injected during the 2014 injection season.”

That record-setting year followed and unusually cold winter that depleted Lower 48 inventories to just 837 Bcf, the lowest level for that time of year since 2003, EIA noted.

Weekly December Natural Gas

Weekly Forecast

Traders should be prepared for another gap opening on Monday. The direction is unknown because it will depend on the forecasts from over the weekend.

A gap over $2.905 will take out last week’s high and signal a resumption of the uptrend. This could trigger a rally into the next main top at $3.009. This is the last main top before the March 5 top at $3.165.

A gap below $2.753 will take out last week’s low. A trade to $2.738 will fill in last week’s gap.

The current short-term range is $2.388 to $2.905. If the selling pressure continues through $2.738 then look for the selling to possibly extend into its retracement zone at $2.647 to $2.585. Buyers could re-emerge on a test of this area.

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