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Jim Hyerczyk

Jim Hyerczyk

Fundamental and technical analyst with 30 years experience.

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Nat Gas Traders Focused On Weather Not Demand

Natural gas futures had a volatile week that began with a gap lowering opening on Monday, December 12. Despite the threat of extremely cold temperatures in several key demand areas in the U.S., forecast for later in the week, sellers came out firing, suggesting they were already looking at the weather pattern weeks in advance. I guess that’s why they call it the “futures” market.

As the week progressed, the selling pressure intensified as investors reacted to a new forecast calling for warmer temperatures in key demand areas. Long speculators took profits and headed to the sidelines as the weather news outweighed government storage data that showed an unexpectedly large draw from inventories.

According to the U.S. Energy Information Administration, natural gas stockpiles fell by 147 billion cubic feet in the week-ended December 9. Analysts and traders were looking for a 130 billion cubic feet drawdown.

The decline in inventory was well-above the average withdrawal of 79 billion cubic feet for that week on a historical basis. Current inventories are now 1.3 percent below last year’s level. It was only a month ago that inventories stood at a record high.

Next week’s inventories should drop even further since they will incorporate this week’s high demand due to the extremely cold temperatures in the Midwest in high usage areas like Chicago. However, traders are likely to treat this data as “old news” because…

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