Natural gas trading outlook: futures lose to warmer weather over the US; inventories data eyed

Natural gas futures dropped some of yesterdays gains during early European trading hours, as weather reports project warmer US over the following days. Heating demand is expected to be below average. Traders await government data on natgas inventories in the US tomorrow, as last weeks heatwave in the West is expected to have pressured gains.

Front month natural gas futures, due in June, lost 0.42% at the new York Mercantile Exchange, to trade for $ 4.779 per million British thermal units at 9:56 GMT. Prices ranged from $4.775 to $4.804 per mBtu. The contract added 2.37% on Tuesday.

Natgasweather.com reported that the high-pressure system over the Plains will move eastward over the following days, warming much of the mid-Atlantic and southern states, as well as portions of the Northeast and Midwest. Meanwhile, a weather system over the Rockies is also set to move eastward, bringing unsettled weather for the central US. Later in the week, somewhat cooler blasts from Canada will cross south, to lower temperatures, but not by much. Overall, expectations suggest warmer-than-average weather over much of the Midwest and Northeast, as well as the South, lowering heating demand.

According to Accuweather.com today in New York temperatures will be normal, with high and low at 68 and 51 degrees Fahrenheit, respectively. Tomorrow and Friday will be slightly cooler, before a nice and strong warm-up in the weekend, when readings will exceed the average by 6-7 degrees. Chicago is set for a period of warming, with readings pushing 75-79 over the next few days, 7-9 degrees above normal. On the West Coast, Los Angeles will remain slightly cooler than normal for this time of year after record-high temperatures last week. The next three days, and into the weekend, readings will be 2-3 degrees below the average, before a warm-up in the weekend and into next week.

Tomorrow the report on natural gas stockpiles in the US for the week ended May 2nd is due, and last weeks cooler weather over the East and heatwave over the West are expected to have impacted gains.

Last weeks report revealed natural gas in storage hubs in the US recorded a gain of 82 billion cubic feet to stand at 981 bcf for the week ended April 25th.

Inventories are still recovering after an extremely cold winter drained supplies. With last weeks major gains, they stand at 44.1% below the figure from last year, and 50.1% under the 5-year average.

Technical view

According to Binary Tribune’s daily analysis, in case natural gas for settlement in June breaches the first resistance level at $4.839 per million British thermal units, it will encounter next resistance at $4.880. If broken, upside movement will probably attempt to advance to $4.953 per mBtu.

If the energy source drops below the first support level at $4.725 per mBtu, it will probably test $4.652. If the second key support zone is breached, the blue fuel’s downward movement may extend to $4.611 per mBtu.