Natural gas futures were climbing during early trade in Europe today, though still near an eight-month low. The blue fuel has lost some 9% since last week, as weather over top-consumer US cooled, limiting power demand and allowing for substantial build up in stockpiles.
Front month natural gas futures, due in August, traded for $3.783 per million British thermal units (mBtu) at 9:55 GMT in New York today, up 0.29%. Prices ranged from a eight-month low of $3.755 to $3.792 per mBtu. The contract lost 2.00% on Tuesday, after a further 2.58% loss on Monday.
“The below-normal temperatures slated to remain fairly dominant in the eastern half of the U.S. will likely take a bite out of natural-gas demand,” analysts at WeatherBELL Analytics wrote in a research note, cited by the Wall Street journal.
NatGasWeather.com suggested an injection of 90-95 billion cubic feet (Bcf) will be reported tomorrow, which would be some 40 Bcf larger than the average gain for the week.
As weather cools, US residences and businesses turn off air cooling, dampening power demand. Power stations account for about 30% of US nat gas consumption and, naturally, power demand impacts natgas prices.
However, some analysts suggest that the slump in prices may allow some stations to shift from burning coal to utilizing natural gas, which could potentially support the blue fuel against further massive declines.
“Natural-gas demand in general is down because of the cool weather but the mix between natural gas and coal is shifting more toward natural gas,” Aaron Calder, market analyst at Gelber & Associates, said for the Wall Street Journal.
This winter was quite brutally cold for the US, resulting in a massive surge for heating demand. The most used fuel for heating in the US is natural gas, and the blue fuel, naturally, peaked to double current prices. Coal, however, is used primarily in industrial and power-station settings, and the soaring natgas prices induced only secondary coal rally, as some facilities switched to coal as a fuel. This created an imbalance between the fuels, which only needed the proper trigger for a repositioning, which could be the weather this month.
US weather outlook
NatGasWeather.com reported today that a series of cool Canadian blasts are already tracking through the central and northeastern US, bringing comfortable temperatures during the usually peak cooling season. The cool period will likely persist for some 10 days, setting the scene for multiple quite larger-than-average weekly injections for natgas inventories. The southern and western US will remain within an area of high pressure, keeping readings relatively high, apart from the extreme Southeast and northwest, which will be briefly subject to cooler systems. Cooling demand over the next seven days will probably be moderate-to-low.
In the 8-14 day outlook, NatGasWeather.com projects a neutral trend for the US, with the Midwest and Northeast experiencing several degrees of cooling, with the cool blasts entering from Canada. The western and southern states will see little weather excitement, with high pressure dominating the outlook, keeping temps high.
New York will see cloudy weather, with a strong thunderstorm in the afternoon today, though temps will be a few degrees higher than average, at 71-88 degrees Fahrenheit, according to AccuWeather.com. Readings will drop several degrees tomorrow, with more clouds and another storm. Later this week temperatures are set to slightly rise, to enter average range for the weekend. Chicago will be quite cooler than usual today, with temperatures at 60-73 degrees, about 10 below average. Up to the weekend the weather will remain cool, though mostly sunny. During the weekend temps will be near-normal, before more below-average temps next week.
Down South, Houston is set for a warm, though stormy day. Temperatures will range 75-95, a few above average. Readings will probably rise over the next few days, for a sunny and hot weekend. Next week will see more heat at the start, and a significant cooling later on. Over on the West Coast, Los Angeles is set for seasonal weather for the rest of the week, with temps between 67 and 88 Fahrenheit. Next week will also be quite normal for the city of angels, with a possible slight drop in temps.
Technical view
According to Binary Tribune’s daily analysis, in case natural gas for settlement in August penetrates the first resistance level at $3.853 per million British thermal units, it will encounter next resistance at $3.935. If breached, upside movement will probably attempt to advance to $3.983 per mBtu.
If the energy source drops below its first resistance level at $3.723 per mBtu, it will see support at $3.675. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.593 per mBtu.
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