Natural gas trading outlook: futures lower as US weather cools

Natural gas futures were lower during early trade in Europe today. Weather forecasts project a cooler few days for most of the northern half of the US, while natural gas inventories will probably log another sizable weekly gain.

Front month natural gas futures, due in July, dropped 0.13% at the New York Mercantile Exchange to trade for $4.529 per million British thermal units at 9:01 GMT today. Prices ranged from $4.517 to $4.538 per mBtu. The contract added 2.00% yesterday, after dropping 1.88% on Monday.

Movement to the downside is expected to be limited as the US enters the summer season when high temperatures spur electricity demand to power air conditioning, with power stations accounting for 30% of US natural gas consumption. The above-normal temperatures over the US recently will probably dent gains in the report this week, which will cover the seven days ending June 20.

“The latest forecasts suggests that the call on nat gas for cooling demand will not be atypical for this time of the year and thus inventory injections are likely to continue to outperform the historical injections,” Dominick Chirichella, senior partner at the Energy Management Institute in New York, said in a note to clients today, cited by Bloomberg.

Chirichella added that blue fuel stockpiles probably expanded by 101 Billion cubic feet (Bcf), while Tim Evans, an energy analyst at Citi Futures in New York, is expecting a gain of 93 Bcf, according to Bloomberg. NatGasWeather.com suggests a gain of about 100 Bcf, with a wider-than-usual range of variance.

US weather report

NatGasWeather.com reported that the US will see quite unsettled weather this week, with plenty of storms and heavy rains. The central and eastern US will see temperatures drop several degrees, accompanied by storms and rains, while the South will remain seasonably warm, with highs in the 90s. Later in the week, the Northeast and Midwest will also start warming, to see readings in the high 80s. Overall cooling demand will probably remain moderate.

In the 8-14 day outlook, NatGasWeather.com projects a warmer trend for the US. The northern half of the country will probably have some stormy and rainy days, though a high-pressure build will prevent too much cooling, and will allow for a rise in temperatures in early July.

New York will be warmer today, according to AccuWeather.com, though a strong afternoon thunderstorm will probably pass by. Readings will range 70-84 degrees Fahrenheit, just above average. Tomorrow will also see a storm and some rains, again with relatively high temperatures, before a cooling later in the week. Boston temperatures will be several degrees above normal today, between 68 and 84, with mostly sunny weather. Tomorrow will bring a heavy morning thunderstorm, alongside lower readings.

Chicago will be significantly cooler than normal today, with readings 10 degrees below average, ranging 56-73 degrees. It will be cool tomorrow as well, though mostly sunny, before readings start climbing on Friday. Down South, Houston will see quite a few storms today and in the following days, though temperatures will remain seasonal, largely ranging mid 70s to upper 80s.

Over on the West Coast, Los Angeles will have mostly sunny weather over the following few days, with readings ranging lower 60s to upper 70s, slightly lower than usual. Seattle will be partly cloudy today, with temperatures between 56 and 74, just above average. Readings will start dropping tomorrow, for a relatively cool weekend with highs in the upper 60s.

Technical view

According to Binary Tribune’s daily analysis, in case natural gas for settlement in July penetrates the first resistance level at $4.584 per million British thermal units, it will encounter next resistance at $4.632. If breached, upside movement will probably attempt to advance to $4.709 per mBtu.

If the energy source drops below its first resistance level at $4.459 per mBtu, it will see support at $4.382. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $4.334 per mBtu.