Natural gas futures weekly recap, June 2 – June 6

Natural gas jumped to a one-month high on Friday and settled the week higher as weather forecasts calling for above-normal temperatures across most of the US offset a larger-than-expected jump in US natural gas inventories.

On the New York Mercantile Exchange, natural gas futures for delivery in July rose by 0.19% to $4.710 per million British thermal units, logging a whole week of session gains. Prices held in a daily range between a one-month high of $4.736 per mBtu and $4.679, and settled the week more than 3.5% higher.

The power-station fuel extended its movement to the upside as weather forecasts calling for above-seasonal temperatures across most of the major US consuming areas implied strong demand as Americans crank up the air conditioning.

The US Northeast will enjoy dry weather over the weekend and readings will rise to near or above normal, hitting the upper 70s into the 80s Fahrenheit. The Midwest will see some severe storms with showers, hail and damaging winds in some areas, coupled with moderate temperatures. However, the southern and western parts of the country will see warmer-than-average weather, boosting demand for electricity as air conditioners are put to work. In the South, readings are expected to surge to the upper 80s and into the 90s, coupled with storms, heavy rains and flooding in some areas. The West will also see some rains and thunderstorms, with temperatures varying between 70 degrees Fahrenheit and up to the 90s and 100s in some areas.

According to AccuWeather.com, the high in New York on Sunday will be 86 degrees, 9 above the average, before surging to 88 degrees on June 16th, 8 above usual. Temperatures in Chicago will peak at 69 degrees Fahrenheit on Sunday, 9 below normal, but will jump to as much as 86 degrees on June 16th, exceeding the average of 80 degrees. Texas City will see seasonal weather over the next 10 days, with readings as high as 88 degrees on Sunday and 85 degrees on June 16th. Meanwhile on the West Coast, the high in Los Angeles on Sunday will be 81 degrees, 5 above the usual, before rising to 86 degrees on June 19th, 7 above normal.

Storage injections

The warmer-than-average weather forecasts offset a larger-than-expected jump in US natural gas inventories. The EIA weekly natural gas storage report for the week through May 30 revealed a 119 billion cubic feet (bcf) jump, beating expectations of 116 bcf increase. The injection is the biggest stockpiles had received since June 2009. Inventories levels remain 33% below reading from last year, but gradually recover.

Last week another huge gain of 114 bcf was logged, setting the tone for more record yields throughout the summer, as suggested by the EIA. However, as the summer season sets in and temperatures rise, air conditioning will become more intense, pushing up power demand, which could hurt natural gas supplies and support price levels.

“As we get into June, cooling demand begins to pick up,” said for Bloomberg Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “Even with the robust stock injections, the market is concerned that we are very shortly going to pass the peak of our injection season and that isn’t going to be enough.”

Technical view

According to Binary Tribune’s daily analysis for Monday, in case natural gas for settlement in July penetrates the first resistance level at $4.738 per million British thermal units, it will encounter next resistance at $4.765. If breached, upside movement will probably attempt to advance to $4.795 per mBtu.

If the energy source drops below its first resistance level at $4.681 per mBtu, it will see support at $4.651. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $4.624 per mBtu.