Heading into what analysts see as a potentially volatile week of trading going into the Thanksgiving holiday, natural gas futures climbed early Monday amid expectations for some colder temperatures next week.
The December Nymex contract was up 4.4 cents to $2.694/MMBtu at around 8:50 a.m. ET. January was up 3.8 cents to $2.808.
The near-term price signals were mixed for natural gas, analysts at EBW Analytics Group said in a note to clients early Monday.
“Over the past three days, the forecast for the week after Thanksgiving has shifted significantly colder, boosting gas prices in early morning trading,” the EBW analysts said. “It is not clear, though, whether this increase is sustainable near-term.”
Warm temperatures this week have the potential to compound the typical demand losses associated with the holiday and keep pressure on physical prices, which could in turn limit upside for futures, according to the firm.
“Options expiration and contract settlement could add volatility this week,” especially with the Energy Information Administration (EIA) set to release its weekly storage report on Wednesday “just hours before December trading ends,” the EBW analysts said.
Looking more closely at the weather picture, over the weekend the new days added to the back end of the 15-day forecast extended recent warmth due to projections for a strong positive Eastern Pacific Oscillation (EPO), according to Bespoke Weather Services.
“It still appears that warmer than normal conditions will prevail at least through December’s first half,” the firm said.
Bespoke said it will remain “cautious” in assessing price moves this week given the potentially lower trading volume ahead of the upcoming holiday and the December contract expiration, a combination that “could lead to erratic price action regardless of the actual data changes.”
For now, “we still need to see more change away from the warm side in the weather pattern for us to believe in a sustainable rally in prices at the front of the curve,” Bespoke said.
From a technical perspective, analysts at ICAP Technical Analysis will be watching to see whether or not the December contract can hold above support at $2.538-2.512.
“Peg $2.662-2.653 as equivalent support for January,” ICAP analyst Brian LaRose said in a note to clients. “…Need a rebound from this vicinity to entertain a bottom. Gunning for $2.421-2.414-2.407-2.400 next if support does not hold.”
January crude oil futures were up 47 cents to $42.89/bbl at around 8:50 a.m. ET, while December RBOB gasoline was up about 2.0 cents to $1.1955/gal.
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