Natural gas trading outlook: futures add after sizable gains last week, stockpiles increase

Natural gas futures traded higher during early hours in Europe today, after logging a sizable gain last week. Traders have had expectations of growing power demand in the US, which consume more than 21% of natgas supply, for some time, in light of rising temperatures. However, inventories scored the biggest injection in five years, a report on Thursday revealed, signaling a peak in shale production.

Front month natural gas futures, due in July, grew by 1.12% at the New York Mercantile Exchange to trade for $4.593 per million British thermal units at 10:00 GMT. Prices ranged from $4.549 to $4.595 per mBtu. On Friday the contract logged a 4.2% gain, as investors bet on an increase in power demand in the US.

Last Thursday, the US Energy Information Administration (EIA) revealed that natural gas supplies in the country had gained 114 billion cubic feet for the week ended May 23, exceeding expectations of a 110 bcf increase. The injection is the biggest weekly growth since June 2009, and is 21 bcf above the average gain for the week.

Tom Saal, senior vice president of energy trading at FCStone Latin America LLC, said, cited by Bloomberg, that this week’s EIA report may show a 119 bcf jump in US gas inventories, above the five-year average of 93 billion cubic feet.

Stocks, however, remain 40% below the 5-year average for the week, and need to recover more than 2.5 trillion cubic feet until November, when heating demand spikes natural gas consumption. In order to fully replenish the drained stockpiles, weekly injections would need to average 90 bcf through October, 20 billion above the average gains.

In the meantime, the hot summer months ahead should bump up natgas-fueled power demand, as air conditioners are put to work. The EIA, however, expects sustained high yields and gains for stockpiles, through booming shale gas extraction.

Weather report

According to AccuWeather.com, New York is set for a nice and warm, sunny day. Temperatures will range 65-82 degrees Fahrenheit, several above average. Readings will remain relatively unchanged through this week, with slight cool later on, though temps will still be above average. Next week will see a significant cooldown, which will bring temperatures to 10 below normal.

Boston will also be quite warmer than usual today, with plenty of sun and readings reaching into the 80s, several above usual. Starting tomorrow, readings will start sliding, to be slightly lower than average for the second half of the workweek. The weekend will be sunny and pleasant, with temperatures 60 to high 70s, a few degrees more than usual.

Chicago might experience a couple of thunderstorms today, but temperatures will remain relatively high at 65-80 Fahrenheit. Tomorrow will be mostly sunny, and just as warm, before on Wednesday readings plummet by 10 degrees, alongside heavy rains and thunderstorms. However, through to the weekend temps will normalize, to range 60 to mid 70s.

Over on the West Coast, Los Angeles will have normal temperatures this week, with highs in the upper 70s and lows about 60, before a slight warm up for the weekend, with readings several above average. Up North, Seattle will be warmer than usual today, temps between 50 and 75. Tomorrow readings will drop a few, though the weather will be mostly sunny. The second half of the week will be sunny and pleasantly warm, with highs in the mid 70s and lows about 50.

Technical view

According to Binary Tribune’s daily analysis, in case natural gas for settlement in July penetrates the first resistance level at $4.593 per million British thermal units, it will encounter next resistance at $4.644. If breached, upside movement will probably attempt to advance to $4.696 per mBtu.

If the energy source drops below its first resistance level at $4.490 per mBtu, it will see support at $4.438. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $4.387 per mBtu.