Natural gas futures regained ground during early trading in Europe today, after losing some yesterday, when a huge gas deal between China and Russia was signed. Later today the US Energy Information Administration will reveal natural gas stockpile levels for the week through May 16, and analysts expect further gains.
Front month natural gas futures, due in June, added 0.65% at the New York Mercantile Exchange to trade for $4.502 per million British thermal units at 9:54 GMT. Prices ranged from $4.479 to $4.503 per mBtu. Yesterday the blue fuel lost 1.74%, while for the week so far the contract has gained 1.38%.
Gazprom, 50.01% of which is owned by the Russian Federation, and Chinas National Petroleum Corporation signed a gas deal yesterday, which is estimated to be worth $400 billion. The contract is for the delivery of more than 1 trillion cubic meters (over 35 trillion cubic feet) of natural gas over 30 years starting 2018, according to Gazproms CEO Alexei Miller.
The deal is thought to be 10 years in the making. China, which consumes about 5% of all natural gas, has been looking for more energy to fuel its growing economy, while Russia is experiencing growing confrontations in Europe, its main gas market.
However, the deal will probably only slightly affect short-to-mid term gas prices, as the pipelines are planned to begin pumping in more than three years. “The whole tenet of the deal has a symbolic value,” said for the BBC Rain Newton-Smith, head of emerging markets at Oxford Economics. “It says that the two countries are prepared to work with one another.”
US weather report
A more immediate impact on natural gas prices has the weather over the US, as the country consumes more than 21% of the worlds blue fuel.
According to AccuWeather.com, New York will be cloudy and might see rains and thunderstorms today and tomorrow. Temperatures will range 56-78 degrees Fahrenheit. Starting on Saturday readings will rise, reaching into the 80s at the start of next week, which is several degrees above average.
Boston will be quite cooler than normal today and on Friday, with temperatures no higher than 58, 10 degrees below usual highs. Come Saturday the heavy clouds will give way to the Sun, and temperatures will rise up to the high 60s. Next week will probably be normal in terms of temperature, though there might be some heat both at the start and end.
Chicago is set for some cool, with readings ranging low 50s to mid 60s, slightly below average, before Sunday brings a sizable warm up, with highs into the upper 70s. Temperatures next week will follow suit, with readings a few degrees above normal.
Los Angeles will also be cooler up to Sunday, with some clouds and a possible thunderstorm. Temperatures will be no higher than 72-73 Fahrenheit, before next week readings rise up to reach the low 80s, several above average.
US inventories
According to a Bloomberg survey, natural gas stockpiles have increased by 103 billion cubic feet for the week through May 16, while other analysts predict 100-102 billion gain. The official Energy Information Administration report is due later today.
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 $4.543 per million British thermal units, it will encounter next resistance at $4.614. If breached, upside movement will probably attempt to advance to $4.652 per mBtu.
If the energy source drops below its first resistance level at $4.434 per mBtu, it will see support at $4.396. 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 
