January natural gas futures were trading 8.0 cents lower at $4.389/MMBtu shortly before 9 a.m. ET Thursday as forecasts showing milder conditions through mid-December continued to apply bearish pressure on prices.
The overnight data showed no major changes overall, with the cold shots currently driving stronger national demand expected to exit early next week, followed by milder temperatures across the northern and eastern United States Dec. 12-18, according to NatGasWeather.
“These mid-December weather systems have flavors of a strengthening El Nino, where the southern U.S. sees a stronger storm track, while the northern U.S. is warmer than normal as high pressure sets up,” the forecaster said. “Going forward, until frigid air over the northern latitudes releases towards southern Canada where U.S. weather systems can tap into it, the coming mid-December pattern is going to be viewed as bearish.
“Most importantly, the overnight data continues to suggest once the sub-freezing cold exits early next week, it shouldn’t be expected back into the northern U.S. until at least Dec. 20-21, potentially longer.”
This should allow storage deficits to improve after the current cold shots are accounted for, and it places the burden on colder trends to return for the last 10 days of December in order for weather sentiment to turn bullish again, NatGasWeather said.
The Energy Information Administration (EIA) is scheduled to release its weekly storage report at 10:30 a.m. ET on Friday, one day later than usual, because federal government offices and financial markets were closed Wednesday for a National Day of Mourning in honor of former President George H.W. Bush, who died Nov. 30.
Early market estimates as of Wednesday clustered around a withdrawal in the low to mid-60s Bcf for the week ending Nov. 30. Kyle Cooper of IAF Advisors projected a pull of 62 Bcf, while EBW Analytics expected a 61 Bcf draw.
Genscape Inc. estimated a 61 Bcf withdrawal for this week’s EIA report. The firm’s supply and demand modeling showed production averaged 86.6 Bcf/d for the period, about 1 Bcf/d stronger week/week (w/w).
Lower 48 demand ran about 90.4 Bcf/d, up nearly 1.3 Bcf/d w/w, according to the firm. Net imports from Canada were down about 0.2 Bcf/d w/w, liquefied natural gas sendouts were roughly flat and exports to Mexico increased about 0.2 Bcf/d w/w.
Compared to degree days and normal seasonality a withdrawal of 61 Bcf would be 4.2 Bcf/d loose versus the prior five-year average, according to Genscape.
Last year, EIA recorded a 3 Bcf withdrawal for the period, and the five-year average is a withdrawal of 58 Bcf.
Looking at the technicals, analysts with Rafferty Commodities Group on Thursday pegged major resistance for the January contract at $4.697/$4.714, with minor resistance at $4.643. The firm’s major support levels heading into Thursday’s trading were $4.230/$4.204/$4.000, with minor support at $4.363.
“The daily chart for January natural gas shows the market trading sideways within a consolidation pattern,” the Rafferty analysts said. “While we favor the conclusion of this pattern with a break above the upper boundary, we want to trade the market against our support and resistance levels until a break can occur either way. The 60 minute chart shows how most of the past two weeks’ trading has taken place within the $4.363 to $4.906 levels.”
January crude oil was trading $1.54 lower at $51.35/bbl shortly before 9 a.m. ET Thursday, while January RBOB gasoline was down about 4.2 cents to $1.4038/gal.