Natural gas futures weekly recap, August 4 – August 8

Natural gas jumped on Friday and marked its biggest weekly advance since February this week as weather forecasts called for warm weather returning to the eastern US, coupled with seasonal and above-seasonal temperatures to the West and South. However, expectations for cool blasts to keep readings lower than usual across the central and northern parts of the country should spur some bearish sentiment next week, keeping price rallies in check.

On the New York Mercantile Exchange, natural gas futures for settlement in September added 2.2% on Friday to close the session at $3.962 per million British thermal units, having shifted in a daily range between $3.975 and $3.872. This was the highest settlement since July 16th. The energy source fell by 1.45% on Thursday after the EIA reported another much larger-than-average weekly build in nationwide gas inventories, but the power-plant fuel settled the week 4.3% higher, marking the biggest weekly advance since the seven days through February 21st.

The Energy Information Administration reported on Thursday that US natural gas inventories rose by 82 billion cubic feet last week, in line with expectations, compared to a 49 Bcf average gain for the past five years.

US weather

Natural gas, however, is expected to see support to the upside as weather across most of the US will be normal and warmer than normal through the end of August. According to Bloomberg, temperatures on the East Coast are projected to be above-seasonal between August 18th and August 22nd.

John Kilduff, a partner at Again Capital LLC, said, cited by Bloomberg: “We’re seeing a pickup in heat and cooling demand, and that’s encouraging some buying today. A lot of traders are perceiving value at these prices, which is giving the market some support heading into the weekend.”

However, movement to the upside will see resistance as cool Canadian air blasts in the middle of the upcoming week are expected to keep readings in the central and northern US at below-seasonal levels.

NatGasWeather.com reported on Friday that the northern and western US remain slightly cooler than usual with showers and comfortably low temperatures through the weekend, some localized drops to the 60s possible, followed by a several-degree rise for temps. The southern US will remain quite hot, with highs reaching triple digits. Overall cooling demand will be moderate, though dropping to low at some point next week.

The first cool blast next Wednesday and Thursday will allow for a more impressive one a few days later. There will likely be only a little break between the two as the second one drops into the Midwest just as the first one is departing. This second blast could be fairly impressive as it will have opportunity to tap chilly northern Canadian air and drive it deep into the US.

In the 8-14 day outlook, analysts say US weather will trend slightly cooler, as the Canadian system is due to head south into the US, bringing rains and clouds, and lowering temps back to comfortable for the Northeast and Midwest. In any scenario, the $4.000 level will play the role of a major resistance, given the bearish outlook for the central and northern US.

“We expect a nearly week long stretch of cooler than normal temperatures over numerous regions of the US, before the pattern finally takes a bit of a breather around August 22,” analysts at NatGasWeather.com said in a note to clients. “It’s not impossible to think heating demand could be needed across the Great Lakes region if enough cold air is tapped.”

According to AccuWeather.com, the high in New York on August 11th will be 86 degrees Fahrenheit, 3 above the average, before dropping to 75 degrees on August 14th, compared to the average of 83. Temperatures are expected to jump back to above normal in the following weak, with highs reaching in the lower 90s between August 20th and August 24th. In Chicago, readings will peak at 71 degrees on August 12th, more than 10 below seasonal, before jumping to 85 degrees on August 17th and reaching into the lower 90s on August 19th.

To the South, Houston will see temperatures maxing out at 96 degrees Fahrenheit tomorrow, 3 above normal, and will remain at around seasonal or above-seasonal levels through August 21st. On the West Coast, the high in Sacramento on Monday will be 91 degrees, near the average of 92, and will remain little-below-average through August 14th. A very warm week is then to come, with readings reaching into the lower 100s between August 17th and August 20th.

Technical support and resistance

According to Binary Tribune’s daily analysis for Monday, in case natural gas for settlement in September penetrates the first resistance level at $4.001 per million British thermal units, it will encounter next resistance at $4.039. If breached, upside movement will probably attempt to advance to $4.104 per mBtu.

If the energy source drops below its first resistance level at $3.900 per mBtu, it will see support at $3.833. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.795 per mBtu.