December natural gas vacillates on either side of unchanged

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Related Articles 11/2/2009 December natural gas extends lower with focus on bearish fundamentals 11/2/2009 Mild weather to help pad already swollen natural gas storage 10/29/2009 EIA reports storage injection of 25 Bcf, within consensus 10/19/2009 WSI expects cold winter in eastern, south-central US

December natural gas futures moved off session lows to trade in modestly positive territory, holding to a relatively narrow trading range from $4.761/MMBtu to $4.940/MMBtu on the CME Globex platform Tuesday, Nov. 3. Traders were moving cautiously, looking to fundamentals for signals to either extend recent losses or drive the market higher. The contract was last eyed up 5.1 cents to $4.875/MMBtu at 1:30 p.m. ET.

The market continues to drift on either side of unchanged, with little definitive support in either direction. Largely bearish fundamentals remain an anchor for natural gas futures values, but the expectation of changing weather and the end of injection season, which could quickly drive down the overwhelming supply of natural gas in underground storage facilities, are drawing the market higher.

Natural gas remains anchored to overall bearish fundamentals, as the fall season has thus far brought mild weather to key heat-consuming markets, preserving the glut of natural gas in underground storage. However, weather forecasts remain sketchy into the winter heating season, as below-average temperatures are seen creeping into heating markets in near-term outlooks, while forecasters are anticipating a colder-than-average winter, particularly for the southeastern and central United States.

The National Weather Service calls for the upcoming six- to 10-day period to bring average temperatures across the bulk of the country. A large swath of above-average temperatures is forecast for the bulk of the country's midsection, while a few areas in the Northeast and Texas should see below-average readings. The eight- to 14-day outlook shows the swath of above-average temperatures in the central United States narrowing, with seasonal average weather moving in from the east and south. Coastal areas in the East and South will see below-average temperatures, the NWS said.

While the milder weather in the near-term outlooks is keeping a lid on natural gas prices, weather could support additional gains down the road, as WSI Corp. sees the period from November to January averaging cooler-than-normal weather in the eastern and south-central United States, with above-normal temperatures common across the western and north-central regions of the country. WSI sees the December-to-February period bringing below-normal temperatures across the East and South, with above-normal temperatures eyed for the Northwest.

The impact of weather on the storage situation adds another near-term weight for the markets, as the injection season continues, with weekly stock builds augmenting an already abundant supply of natural gas in underground storage facilities. Swollen storage facilities, however, are impeding the ability for sizable additions to weekly storage numbers, as producers are finding capacity limited on pipelines and into storage, preventing any major jumps in stocks in the last few weeks of the official injection season

However, expectations for U.S. Energy Information Administration data to be released Thursday suggest a build near 30 Bcf for the week ended Oct. 30, compared to a 29-Bcf five-year average injection and a 23-Bcf year-ago build for the week. It would be the first time in eight weeks that the weekly build outpaced the five-year average.

As of the most recent EIA report, released Oct. 29, the 25-Bcf injection for the week ended Oct. 23 lifted working gas levels to 3,759 Bcf, now 373 Bcf above year-ago levels and 414 Bcf above the five-year average for the same week, down from a five-year average surplus peak of 517 Bcf on Aug. 7.

With the possibility of two more injections in the weeks following the Nov. 5 report, the EIA last projected on Oct. 6 that working natural gas stocks could reach 3,850 Bcf at the end of the injection season, about 285 Bcf above the previous record of 3,565 Bcf reported for the end of October 2007. The season-ending estimate will most likely be trimmed in the EIA's next "Short-Term Energy Outlook," scheduled for release Nov. 10.

Technically, support for December natural gas is found near $4.75 and $4.50, while resistance is marked near $5, $5.25 and $5.50.