Join our community of traders FOR FREE!

  • Learn
  • Improve yourself
  • Get Rewards
Learn More

Natural gas trading outlook: futures stable ahead of supply data on Thursday; warm weather to stay

Natural gas futures orbited Tuesdays closing price during early trading in Europe today. Over the past two days the blue fuel recorded sizable gains, as the warm weather over the US is expected to bump up power demand. Meanwhile, the relatively high temperatures are forecast to extend their stay through the weekend, and to rise further into next week. Inventories are expected to record sizable gains.

Front month natural gas futures, due in June, lost 0.11% at the New York Mercantile Exchange to trade for $4.547 per million British thermal units at 9:46 GMT. Prices ranged from $4.526 to $4.557 per mBtu. Yesterday the blue fuel added 1.83%, reaching a 10-day peak of $4.570 per mBtu, while for the week so far the contract has gained 3.12%.

According to AccuWeather.com, New York is set for several days of sporadic showers and thunderstorms, though temperatures will range 55-70 degrees Fahrenheit, which is normal for this time of year. Starting Sunday readings will rise to the lower 80s, as the weather will be mainly sunny and dry. Chicago will be also be warm today, with temperatures in the range of 54-78 degrees. Come Thursday readings will drop several degrees, but will remain, largely, within normal range for the season. Next week will bring significantly warmer weather, with highs 10 or more degrees above average. Los Angeles will be slightly cooler than usual today and will remain so for the next few days. Temperatures will reach up to mid 70s at most, while lows will be in the upper 50s. As in the rest of the country, next week will be hotter, and the West Coast will see readings in the mid-to-high 80s.

US inventories

According to a Bloomberg survey, natural gas stockpiles have increased by 103 billion cubic feet for the week through May 16. The official Energy Information Administration report is due on Thursday.

Last week inventories recorded a 105 billion cubic feet increase for the week ended May 9, which was the highest injection in almost a year. Analysts had expected a build up of around 100 billion cubic feet.

Output from shale formations will lead to record output through the end of October, when heating demand kicks in, Goldman Sachs Group Inc. said in a note.

Offsetting possible inventory gains from increased production, to some extent, the US summer season sets in. As temperatures rise, power demand will be growing, as air conditioners are put to work. Power plants consume more than 30% of the blue fuel in the US.

“As long as we see signs of seasonal demand picking up, the tight fundamentals are going to provide an upward bias in the market,” said for Bloomberg Gene McGillian, analyst and broker at Tradition Energy in Stamford, Connecticut.

Technical view

According to Binary Tribune’s daily analysis, in case natural gas for settlement in June on the NYMEX penetrates the first resistance level at $4.605 per million British thermal units, it will encounter next resistance at $4.657. If breached, upside movement will probably attempt to advance to $4.745 per mBtu.

If the energy source drops below its first resistance level at $4.465 per mBtu, it will see support at $4.377. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $4.325 per mBtu.

TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover Forex, Price Action and Social Trading.

Related News