Natural gas futures weekly recap, May 19 – May 23

Natural gas rose on Friday as investors covered short positions after a 4.3%-drop in the previous two sessions but settled the week lower as weather forecasting agencies predicted mostly seasonal weather across the US in the upcoming days.

On the New York Mercantile Exchange, natural gas futures for delivery in June rose by 1.06% on Friday to $4.405 per million British thermal units, having ranged between daily high and low of $4.358 and $4.411 per mBtu. The energy source fell by 2.55% on Thursday after a bearish storage report by the EIA, hitting a one-week low of $4.359, and closed the week 0.1% lower, its third consecutive weekly decline.

The power-station fuel rose on Friday as investors locked in profits and covered shorts after the previous two days 4.3% drop. Market players exited positions ahead of the weekend and the Memorial Day holiday in the US on Monday when markets will be closed, with weather forecasts calling for mostly seasonal weather across the US.

In the Northeast, there will be a general warming trend during the weekend, coupled with scattered showers across northern New England, but no severe weather is to be expected. Meanwhile, the Midwest will see mild to warm temperatures with plenty of showers and thunderstorms over the Plains. The countrys western regions will look at cooler readings and great chance of rain for much of the Rockies and Four Corners area. In the south, highs are expected between 80 and 90 degrees Fahrenheit during the weekend. Most of the region will see dry weather with a few severe thunderstorms isolated in the Southeast.

According to AccuWeather.com, New York will enjoy seasonal weather on Sunday, with temperatures ranging between 58 and 71 degrees Fahrenheit before dropping to 68 degrees on Wednesday, 6 below the average. In the Northeast, readings in Boston will peak at 66 degrees on Sunday, below the average of 69 degrees, and remain beneath the usual through the business week, with temperatures on Wednesday rising to as much as 61 degrees Fahrenheit, below the average of 70.

Chicago will enjoy sunny and mostly seasonal weather throughout the week, with highs on Sunday reaching 76 degrees Fahrenheit, 3 above the usual, before easing to 73 degrees on Wednesday, 1 beneath the average. In the west, Los Angeles will see mostly sunny weather in the coming days, with highs on Sunday matching the average of 75 degrees Fahrenheit, before jumping to 80 degrees in the middle of the week, 5 above normal.

US inventories

On Thursday, the EIA released its weekly report on natural gas storage levels in the US for the week through May 16. The report showed that supplies of the blue fuel had added 106 billion cubic feet (bcf), exceeding expectations of 100-103 bcf growth. The figure records the biggest weekly gain since June 2013, and is 16 bcf above the 5-year average increase for the week.

However, stocks still need to recover more than 2.5 trillion cubic feet in order to restore pre-winter levels before November. This equals an average of more than 100 bcf gains each week till then, and as summer season sets in, such growth might be hard to achieve.

Shale gas production is peaking, but power demand will be inevitably growing, as air conditioners are put to work for the hot summer months ahead.

Elsewhere, Russia and China signed a major gas contract on Wednesday. The deal is for the delivery of over 35 trillion cubic feet of gas to China over 30 years, starting 2018. The deal, however, will probably only slightly affect short-to-mid term gas prices, as the pipelines are planned to begin pumping in more than three years.

Technical view

According to Binary Tribune’s daily analysis, in case natural gas for settlement in June penetrates the first resistance level at $4.425 per million British thermal units on Tuesday, it will encounter next resistance at $4.444. If breached, upside movement will probably attempt to advance to $4.478 per mBtu.

If the energy source drops below its first resistance level at $4.372 per mBtu, it will see support at $4.338. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $4.319 per mBtu.