Natural gas trading outlook: futures drop as mild weather is expected

Natural gas futures dropped during early European trading hours, following increasing certainty over warming weather reports for the US, and hopes of refilling gas stocks after an unseasonably cold winter.

On the New York Mercantile Exchange, natural gas futures for delivery in May traded at $4.540 per million British thermal units at 09:48 GMT, a drop of 0.59% for the day. This was the third decline in four days, accumulating a total loss of more than 2.5%. Today prices shifted in a range between $4.572 and $4.535.

NatGasWeather.com reported chilly weather for today through Thursday, when temperatures will rise, marking the start of a period of active weather, that will last until the end of April. After the warm-up on Thursday, a cold blast will be quick to follow, coming in over the weekend, increasing demand for heating fuel. The cold weather, however, will not last and will not be as impressive as the previous cold blast, questioning the rise in demand.

Beginning next week a significant warm-up is expected, which is the driving force behind the lowering of gas futures. Several days into the warm-up a cold blast will, again, drive fuel consumption up, but it is expected to be a low-to-moderate increase.

The week through April 29th will see more active weather, with rising temperatures expected in the first half of the week, and colder air coming in during the second half. Readings will push 70s and 80s in the southern states and in the Plains at times, and there will be seasonal or warmer-than-normal conditions in the Northeast and Midwest.

Prices spiked on Tuesday amid forecasts for short-term below normal temperatures, but profit-taking erased most of the contracts daily gains.

Tomorrow the Energy Information Administration will release its weekly natural gas storage report. Last week the agencys data signified a 4BN cubic feet rise in inventories during the week ended April 4th, though overall stocks are more than 50.7% lower from a year earlier and 54.7% beneath the 5-year average – the lowest in 11 years. Analysts had expected a gain of 15 billion cubic feet.

Technical view

According to Binary Tribune’s daily analysis, in case natural gas for settlement in May penetrates the first resistance level at $4.6297 per million British thermal units, it will encounter next resistance at $4.6923. If breached, upside movement will probably attempt to advance to $4.7517 per mBtu.

If the energy source drops below its first resistance level at $4.5077 per mBtu, it will see support at $4.4483. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $4.3857 per mBtu.