Natural gas futures were slightly higher during early trade in Europe today, as investors await the weekly US nat gas storage report. Analysts project another massive injection, but caution of extremely oversold prices.
Front month natural gas futures, due in August, traded at $3.766 per million British thermal units (mBtu) at 9:07 GMT in New York today, up 0.11%. Prices ranged from an eight-month low of $3.744 to $3.771 per mBtu. The contract lost 0.27% on Wednesday and is down some 4.8% so far this week, having lost the same amount last week as well.
“Light air-conditioning demand this month has enabled the industry to maintain the sort of restocking pace more typical of the low-demand shoulder periods of the season,” Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York, said in a note to clients today, cited by Bloomberg. The current weather outlook suggests the next three storage reports “will likely rival or exceed the all-time records” for those weeks. The storage injection record for last week is 97 billion cubic feet.”
NatGasWeather.com suggested a build of 90-94 billion cubic feet (Bcf) will be reported later today, which would be a massive ~40 Bcf more than the 5-year average gain for the week of 46 Bcf. The next few builds will also probably see significantly higher-than-average injections. The analysts add, however, that prices are extremely oversold and are due for a rally at any time.
Also, some experts 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 on Thursday that the first in a series of cool blasts from Canada is continuing to track over the northern US, lowering temps and bringing clouds and some rain to the region. The following systems will have more of an impact on US temperatures, and will bring much more unsettled weather. 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 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 is set for a cooler, though sunny Thursday, with temperatures ranging 69-84 degrees Fahrenheit, a few degrees below normal, according to AccuWeather.com. Temps will slightly climb over the following few days, though Sunday will feature a couple of thunderstorms and some rain. Next week will be slightly cooler than usual, though still sunny, with highs in the lower 80s. Chicago will again see cool weather today, temps between 59 and 74 degrees. Through to the weekend readings will slowly climb, though rains, clouds and storms are bound, as unsettling systems from Canada track through. Next week will also be cooler than usual, with highs in the upper 70s.
Down south, Houston will probably see a storm today, though temps will be seasonal, at 75-94. It will be mostly sunny and just as warm through to next week. Over on the West Coast, Los Angeles temperatures will be above-average today, ranging 69-89, several degrees more than usual. Readings will normalize into the weekend, before slightly climbing next week.
Technical view
According to Binary Tribune’s daily analysis, in case natural gas for settlement in August penetrates the first resistance level at $3.802 per million British thermal units, it will encounter next resistance at $3.842. If breached, upside movement will probably attempt to advance to $3.867 per mBtu.
If the energy source drops below its first resistance level at $3.737 per mBtu, it will see support at $3.712. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.672 per mBtu.
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