Natural gas futures are trading lower early Wednesday with the market posting an inside move on the daily chart which usually indicates investor indecision and impending volatility. Basically, it’s being caused by a combination of technical resistance at $2.2685, a mixed weather forecast, cash prices and liquefied natural gas demand. However, lower production and expectations of a better than average government storage report are propping up prices.
At 12:07 GMT, January natural gas futures are trading $2.630, down $0.052 or -1.94%.
According to Natural Gas Intelligence (NGI), spot gas prices were mixed across most of the United States, but big gains continued on the East Coast ahead of a second winter storm set to unleash frigid air on the region. Weather models that have been far from bullish, but now projected variability in the outlook for the balance of December have been providing support.
LNG demand remains robust, with U.S. export facilities generally operating near full capacity. NGI data showed feed gas deliveries first breaching the 11 Bcf over the December 5-6 weekend, and flows had remained near that level until Tuesday when feed gas dropped to 10.7 Bcf.
Short-Term Weather Outlook
According to NatGasWeather for December 16 – 22, “A winter storm with heavy rain and snow will track up the East Coast today and Wednesday with chilly lows of 10s to 30s. It’s also cool across the central and northern U.S. to aid strong national demand. A second system will bring rain and snow to the Northwest. A mild break with widespread highs of 40s to 70s is expected over most of the U.S. this weekend into next week for light demand besides the unsettled Northwest & Northeast corners. Overall, national demand will be moderate to high through Friday, then back to low.
The main trend is down on the daily chart, but the minor trend is up. This is contributing to this week’s sideways price action.
The main range is $3.002 to $2.368. Its 50% to 61.8% retracement zone at $2.685 to $2.760 is resistance. This zone stopped the rally earlier in the week at $2.708.
The minor range is $2.368 to $2.708. Its 50% level at $2.538 is the first potential downside target and support.
“Weather will undoubtedly be the driving force; however, weather-adjusted supply-demand, which appeared to massively loosen in mid- to late November, is once again remarkably tight,” analysts at Mobius said.
For a look at all of today’s economic events, check out our economic calendar.