Natural gas trading outlook: futures steady near six-month low

Natural gas futures were little changed during early trade in Europe today. Last week saw a massive weekly build for natgas inventories, and another sizable injection is expected in this weeks log as well.

Natural gas futures for September were down 0.08% to trade at $3.795 per million British thermal units (mBtu) by 10:37 GMT on the New York Mercantile Exchanged today. Prices ranged from $3.761 to 3.804 per mBtu, not far from the six-month low of $3.725. The blue fuel added about 0.3% last week.

The US Department of Energys statistical arm, the Energy Information Administration (EIA), said last Thursday that nationwide US natural gas inventories rose by 88 billion cubic feet in the seven days through July 25th. Although this was almost double the five-year average gain of 46 billion cubic feet, the build was below analysts’ projections for a gain in the range between 90 and 94 bcf, leading to a jump for natgas prices.

“This was a bullish storage number by recent standards,” said Kent Bayazitoglu, analyst at Gelber & Associates in Houston, said for Bloomberg. “It’s a sign that there could be some fuel-switching going on at power plants as gas prices decline.”

Power plants account for about 31% of US gas consumption.

Due to last week’s mild weather, the blue fuel will likely see a sizable injection logged in this week’s report as well, which will cover the period to August 1, analysts at NatGasWeather.com said. The report will be released on Thursday.

However, a gradual warm-up starting early next week and extending throughout August is expected to begin lifting prices.

US weather outlook

According to NatGasWeather.com’s weather forecast for the August 1 – August 7 period, temperatures over most of the US will begin to gradually edge higher late this week, paving the way for a slightly warmer trend. Cooling demand will be lower than usual.

In the time span between August 8th and August 14th, NatGasWeather.com expects high pressure to set up over the eastern, southern and western parts of the country, with temperatures rising to between 90 and 100 degrees Fahrenheit. Humid conditions over the high-consuming southern states will further add to strong seasonal cooling demand.

The Midwest and Northeast will see readings climbing into the the 80s and lower 90s. However, the country’s northern areas will remain vulnerable to cooler Canadian weather systems that will probably attempt to push into the US around the middle of August. In case the ridge holds off the cool blast, the pattern will remain quite warm and drive significant cooling demand in the region as well. The remaining portion of the country will see warm weather inducing seasonally high power demand, starting at moderate levels early next week.

New York will see seasonal temps today, ranging 71-82 degrees Fahrenheit, AccuWeather.com said. It will be mostly cloudy, however, and a pm thunderstorm is expected. Readings will remain largely unchanged throughout the week, with more storms and clouds in the first half, and slightly lower temps, though with more sun later on. Chicago is set for another storm, accompanied by locally heavy rains today, as temps keep to just below-average, ranging 66-81 degrees. The first half of the week will be quite cooler, with readings dropping some 10 degrees below average on Wednesday, before climbing to near-normal later on.

Down South, Houston will see seasonal temperatures this week, between mid 70s to low 90s. Thunderstorms will be abound, though it will be mostly sunny, as temps slowly rise to stand slightly above average at weeks end. Over on the West Coast, Los Angeles will have seasonal readings today, ranging 64-82 Fahrenheit. Temps will slightly lower as the week draws by, before rising back to near-normal for the weekend.

Technical support and resistance levels

According to Binary Tribune’s daily analysis, natgas September futures central pivot point stands at $3.819. In case the contract penetrates the first resistance level at $3.856 per million British thermal units, it will encounter next resistance at $3.915. If breached, upside movement will probably attempt to advance to $3.952 per mBtu.

If the energy source drops below its first resistance level at $3.760 per mBtu, it will see support at $3.723. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.664 per mBtu.