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Natural Gas Futures Surge with Colder Weather Boosting Demand

2024-12-09

Natural gas futures witnessed a significant surge on Monday, with key technical levels being crossed. The 50-day moving average at $3.115 and the 50% retracement at $3.118 became immediate support zones. This upward movement sets the stage for potential further rallies, with the next major resistance at the 200-day moving average at $3.383, followed by $3.444, a crucial pivot point. A breach of $3.444 could potentially open the door to a rally towards the main top at $3.647.

Unraveling the Intricacies of Daily Natural Gas Markets

Technical Breakout and Support Zones

Natural gas futures on Monday showed remarkable strength as they surged past critical technical levels. The 50-day moving average at $3.115 and the 50% retracement at $3.118 acted as strong support, indicating a potential shift in market sentiment. This breakout above these levels suggests that the market may be entering a new phase of upward momentum. Traders are closely watching these support zones as they provide a crucial reference point for future price movements. If the market manages to hold these support levels, it could pave the way for further gains. However, a failure to do so could lead to a significant pullback.The 200-day moving average at $3.383 now stands as the next major resistance level. Breaking above this level would be a significant milestone and could trigger a more substantial rally. Additionally, the key pivot at $3.444 holds importance as it represents a potential turning point. If prices can overcome this resistance, it could open up the path to the main top at $3.647.

Colder Weather and Demand Outlook

Over the weekend, weather models took a turn towards colder temperatures. Heating degree days (HDDs) increased by 20 in the Global Forecast System (GFS) and over 10 in the European model. This change is particularly significant as a cold front is forecasted to sweep across the U.S. East and Midwest from December 20-23. Temperatures during this period are expected to drop into the 10s to 30s, with lows reaching as cold as -0s in some areas.Although milder conditions dominate much of the 15-day forecast, the new colder pattern is less bearish than earlier expectations. This indicates that the demand for natural gas for heating purposes may increase, providing some support to the market. However, it remains to be seen how long this colder weather will persist and how it will impact overall demand.

Oversupply and Headwinds

Production remains at a high level of over 104 Bcf/day, while the latest EIA report showed a smaller-than-expected 30 Bcf withdrawal. Total storage currently stands at 3,937 Bcf, which is 284 Bcf above the five-year average. These figures highlight the ongoing concerns about oversupply in the natural gas market, even as seasonal demand for heating intensifies.The high production levels and relatively large storage levels pose a challenge to the market, as they put downward pressure on prices. Traders will need to closely monitor inventory reports and production data to assess the balance between supply and demand. Any significant changes in these factors could have a significant impact on market sentiment and price movements.

Market Forecast and Risks

The short-term outlook for natural gas futures is cautiously bullish, supported by the strong technical breakout above $3.115 and the colder weather forecasts. Prices are positioned to test the resistance at $3.383 and $3.444, with a potential move towards $3.647 if demand expectations continue to improve and technical momentum holds.However, downside risks remain. If support at $3.115 fails, the market could retrace to $2.993, and if selling pressure intensifies, prices could potentially test $2.762. A failure to sustain the colder weather patterns or further underwhelming storage withdrawals could weaken bullish sentiment and lead to increased selling pressure. Traders must closely monitor weather updates and inventory reports to accurately gauge market direction and make informed trading decisions.

The U.S. stock market witnessed a mix of movements on Monday. After the S&P 500 and Nasdaq achieved record closing highs in the previous session due to upbeat corporate forecasts, futures remained subdued. Investors were eagerly awaiting a crucial inflation report due later this week. The consumer prices index (CPI) data on Wednesday is one of the last major datasets before the Federal Reserve's Dec. 17-18 meeting and could significantly influence the central bank's monetary policy path. Bets of a 25-basis-point rate cut in December soared to over 87% as Friday's data showed a surge in U.S. job growth in November despite being hampered by hurricanes and strikes. However, the rise in the unemployment rate to 4.2% indicated a loosening labor market. Economists at Jefferies wrote in a note that they remain in the December rates cut camp and expect a 25-bp cut next week. But after the December meeting, they anticipate the pace of rate cuts to slow to once a quarter, with the next cut expected in March. Meanwhile, Citigroup revised its December rate cut call to 25-bps from its prior forecast of 50 bps. A host of Fed officials, including Chair Jerome Powell, last week stated that the central bank could be more cautious with its monetary policy easing path given the economy's resilience.

Workday and Apollo's Surge

At 7:13 a.m. ET, Workday WDAY and Apollo Global Management APO jumped 9% and 6.3%, respectively, on their planned inclusion into the S&P 500 index. This significant move showcases the positive impact of such additions on these companies. It highlights the confidence of market participants in their future prospects and the potential for growth. The inclusion in the S&P 500 provides them with increased visibility and access to a broader investor base.

Interpublic's Advance

Interpublic Group IPG advanced 14.6% after a report indicated that marketing conglomerate Omnicom OMC was in advanced talks to acquire the advertising company. This development has sparked excitement in the market as it could lead to synergies and growth opportunities. Omnicom shares, on the other hand, were down 5.2%, reflecting the market's reaction to the potential acquisition. Such merger talks often have a ripple effect on the stock prices of the involved companies and can drive significant market movements.

Notable Pre-Market Movers

Nvidia NVDA was last down 1.8% after China's market regulator opened an investigation into the company over suspected violation of the country's antimonopoly law. This regulatory action has had an impact on Nvidia's stock price, highlighting the importance of compliance and regulatory environments in the global market. U.S.-listed shares of Chinese companies gained as the Chinese Politburo hinted at a shift to looser monetary policy next year and more proactive fiscal policy to stimulate economic growth. Alibaba BABA was up 6.1%, PDD Holdings PDD climbed 9.1%, and Baidu BIDU added 5.3%. These gains demonstrate the sensitivity of Chinese stocks to policy changes and the potential for growth in a more favorable economic environment.

With the recent global climate summit coming to a close, it brought forth challenging insights. An incoming president has pledged to once again withdraw the U.S. from international climate agreements. Simultaneously, the frequency and severity of weather disasters are on the rise, defying previous norms. This situation prompts a serious examination of what is being termed an existential crisis, and the prospects seem rather dire. However, Dr. Ayana Elizabeth Johnson has presented a different perspective in her work. "What If We Get It Right? Visions of Climate Futures" is a remarkable compilation that combines essays, interviews, data, poetry, and art. Johnson deftly leads the reader through a maze of solutions and possibilities at the intersection of science, policy, culture, and justice. She is a renowned marine biologist, a policy expert, the co-founder of the nonprofit think tank Urban Ocean Lab, and a frequent guest on Equal Time.

Unraveling Climate Futures with Johnson's Provocative Work

Challenges at the Climate Summit

The recently concluded global climate summit presented a set of complex and difficult takeaways. The decision by the incoming president to remove the U.S. from international climate agreements once again raises concerns about global cooperation in addressing climate change. The increasing frequency and intensity of weather disasters serve as a stark reminder of the urgency of the situation. These challenges demand a comprehensive and collaborative approach to find solutions.There is a growing realization that climate change is not just an environmental issue but also a social and economic one. The impacts of climate change are felt across different sectors, and it requires the collective efforts of governments, businesses, and individuals to mitigate its effects.

Johnson's Visionary Work

Dr. Ayana Elizabeth Johnson's "What If We Get It Right? Visions of Climate Futures" offers a fresh and inspiring perspective. Through a diverse range of elements such as essays, interviews, data, poetry, and art, she guides the reader through a journey of possibilities.Her work emphasizes the importance of science in shaping climate policies. By presenting data and analysis, she shows how scientific knowledge can inform decision-making and lead to more effective solutions. At the same time, she also highlights the role of culture and justice in addressing climate change.Johnson's vision goes beyond just technical solutions. She encourages a holistic approach that considers the social and cultural aspects of climate change. By engaging with different communities and cultures, she believes that we can find innovative ways to address the issue.

Solutions at the Nexus

At the nexus of science, policy, culture, and justice, there are numerous solutions waiting to be explored. Johnson's work showcases some of these possibilities.One of the key aspects is the integration of science and policy. By ensuring that scientific research is translated into policy actions, we can accelerate the transition to a low-carbon economy. This requires strong leadership and collaboration between scientists and policymakers.Culture also plays a crucial role in shaping attitudes and behaviors towards climate change. Through education and awareness campaigns, we can foster a sense of responsibility and urgency among individuals. Art and poetry can also be powerful tools for communicating the message of climate change and inspiring action.Justice is another important dimension. Addressing climate change requires a fair distribution of resources and responsibilities. It is essential to ensure that vulnerable communities are not disproportionately affected by climate change and that they have access to the necessary support and resources.In conclusion, Dr. Ayana Elizabeth Johnson's "What If We Get It Right? Visions of Climate Futures" provides a valuable contribution to the ongoing discussion on climate change. Her work highlights the importance of a multi-faceted approach and encourages us to think beyond the immediate challenges and explore the possibilities for a sustainable future.