Natural gas prices were again below the psychological barrier of $4, after failing to close above the threshold in the previous two sessions. Cooler temperatures over much of the US were enough to keep pressure on prices ahead of the EIA report on storage levels tomorrow.
Natural gas for delivery in September traded at $3.948 per million British thermal units (mBtu) at 9:41 GMT on the Nymex, down 0.65%. Prices ranged from $3.942 to $3.986 per mBtu. The contract added 0.23% yesterday, reaching a monthly peak at $4.020.
“Another very challenging day of price action in the nat gas markets as they tested both sides of $4.00 many times before selling off at the close to again finish nowhere,” analysts at NatGasWeather.com said in a note to clients today, addressing Tuesdays action. “Strong bearish headwinds will continue through the rest of the week, and then slowly ease into early next week as gradually warmer weather systems sweep through.”
Investors are now looking to Thursdays Energy Information Administration (EIA) report on the weekly natural gas inventories build. Experts suggest an injection in the range of 81-84 billion cubic feet, some 30 bcf above the average for the past five years, while adding that next weeks build could be even bigger. If so, it would be almost five months of continuous above-average weekly builds, which will bring inventories back to comfortable levels ahead of heating season, which typically starts in November.
Power plants account for 30% of US natgas consumption, and usually air conditioners are put to hard work in the summer, pushing natural gas demand higher. This year, however, below-par temperatures in what is normally peak heating season depressed prices after the surge in heating demand during the brutally cold winter.
“There will still be enough rain and cloud cover to keep temperatures cooler than normal within regions, limiting demand” this week, NatGasWeather.com said. “The warm up coming at the end of next week has significant flaws and there are more ways it could fail colder than warmer, and that would be bearish.”
US weather outlook
According to NatGasWeather.com, the next seven days will be cooler than normal for the Midwest and the eastern States, with many showers and some rain. The South remains seasonally hot, with highs in the 90s, while the West will see some cool with thunderstorms tracking through. Overall cooling demand is projected to be lower than normal.
In the 8-14 day outlook, most of the US will be subject to a high pressure build, which will allow for rising temperatures across many highly populated areas. The North, however, remains vulnerable to cool Canadian air, which could lower temps later in the period.
New York is set for a rainy day, with slightly sub-seasonal temperatures at 64-82 degrees Fahrenheit, according to AccuWeather.com. It will be mostly sunny through to the weekend, though readings will drop a few, before climbing back to normal for the weekend and into next week. Chicago remains cooler than usual today, with temps between the comfortable 60 and 71 degrees, several below average. It will be slightly cooler tomorrow, though just as sunny and pleasant, before temps start rising through to next week, though readings will not be reaching seasonal levels even into next week.
Down South, Houston will be very warm with temperatures ranging 73 – 96 degrees. Temps will remain seasonal to slightly-above-seasonal through to next week, with mostly sunny weather, though a majority of the days have a strong possibility of afternoon thunderstorms. Over on the West Coast, Los Angeles will see slightly sub-seasonal temperatures today, at 63-80. Readings will be climbing through to the weekend, and are projected to rise to several degrees above average later next week.
Technical support and resistance levels
According to Binary Tribune’s daily analysis, September natgas central pivot point on the NYMEX stands at $3.983. In case the contract penetrates the first resistance level at $4.011 per million British thermal units, it will encounter next resistance at $4.049. If breached, upside movement will probably attempt to advance to $4.077 per mBtu.
If the energy source drops below its first resistance level at $3.945 per mBtu, it will see support at $3.917. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.879 per mBtu.
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