At 0946 GMT, January Natural Gas futures are trading $4.323, down $0.084 or-1.93%.
Bespoke Weather Services
“The natural gas market continues to keep everyone on their toes.” Buyers “initially tried to break prices higher before warmer European model guidance pulled prices back lower.”
“As expected, models are showing that the return of cold will likely be delayed to the end of December, and though after December 25 we could see a weak cold shot, the real cold risks should wait until January,” the firm said. “…This is not to say that cold will not arrive, into early January we see cold risks increase, and once they are more consistent and pronounced on weather models we expect prices to rally significantly (and the market is still jumpy enough that we struggle to turn sentiment fully bearish outside of the short-term).”
Over the next six- to 10-days, the South is expected to trend colder and the West warmer. The Midwest and East are expected to have above normal temperatures.
In the 11-15 day forecast, “models continue to advertise a changing pattern during this period, with Pacific flow waning as a ridge builds through Alaska. The negative Eastern Pacific Oscillation response is often one taking on colder themes in the U.S., and the forecast, which begins with widespread above to much above normal temperatures in the eastern half, allows for warmth to ease as the period progresses.”
“Below normal temperatures are expected to return to parts of the West in the early half.” “It is not clear if cold in the West will make its way eastward, and the forecast is slow with this potential on a warmer forcing out of the tropics.”
“Mild high pressure will gain ground across the central, northern and eastern U.S. the next few days, easing national demand as highs of 40s to 60s become widespread across the country, locally 70s across the far southern U.S./Texas.”
“A weather system currently tracking through the West will push into Texas and the South for the second half of the week with rain, snow and colder than normal temperatures, but really this is the only cool feature as most of the country remains milder than normal.”
“There will be several additional weather systems impacting the U.S. late this weekend and next week, but with only brief shots of colder air.”
Bespoke Weather Services is saying that this week’s U.S. Energy Information Administration storage report is likely to show a “solid draw” in the mid- to upper 80 Bcf range. Bespoke went on to say that, “This will continue to emphasize that storage levels are dangerously low should we see significant cold sustain through the winter, though loosening on warmth will similarly indicate we need that cold to sustain for storage fears to really be justified.”
The early price action indicates that traders are reacting to the change in the forecasts to a period of warmer temperatures beyond Christmas and perhaps into the first of January.
Trading on the weak side of the retracement zone at $4.431 to $4.557 indicates the selling pressure is getting stronger. This zone is new resistance.
If the downside momentum continues then look for a test of the minor bottom at $4.231. Taking out this level will change the minor trend to down. This could trigger a move into the main retracement zone at $4.082 to $3.873.
This article was originally posted on FX Empire
The United States Natural Gas Fund L.P. (UNG) was trading at $33.35 per share on Wednesday afternoon, down $1.98 (-5.60%). Year-to-date, UNG has gained 43.01%, versus a 0.62% rise in the benchmark S&P 500 index during the same period.
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