Natural gas futures weekly recap, September 1 – September 5

Natural gas fell for a fourth straight day on Friday to settle the week almost 7% lower after the EIA reported a larger-than-expected build in US inventories in the week ended August 29th and weather forecasting agencies predicted a broad cooling of temperatures starting this weekend.

On the New York Mercantile, natural gas futures for settlement in October settled at $3.793 per million British thermal units, down 0.68% on the day. Prices held in a daily range between $3.848 and $3.781. This was the energy sources fourth straight daily decline, settling the week 6.83% lower.

The Energy Information Administration reported on Thursday that US natural gas stockpiles added 79 billion cubic feet (bcf) in the week ended August 29th, exceeding analysts’ projections for a build in the range of 72-76 bcf. At 2.709 trillion cubic feet, storage levels narrowed the deficit to the five-year average of 3.204 trillion cubic feet to 15.4%. This was the twentieth consecutive week of above-average inventory injections.

The East Region received a net injection of 59 bcf, narrowing its deficit to the five-year average to 13.5%, while the West Regions 10-billion bcf gain narrowed its gap to 9.7%. The producing region also added 10 billion cubic feet and was 21.2% below the five-year average.

US weather

Bearish sentiment was further fanned as weather forecasts called for an upcoming almost nationwide cooling. According to NatGasWeather.com’s September 5th – 11th weather outlook, a fast-moving cool front will bring showers, thunderstorms and comfortable temperatures across the southern and eastern US during the weekend and early next week. Cooling demand over the next seven days will remain overall moderate compared to normal as the western and far southern parts of the country will remain quite warm, with highs reaching into the upper 80s and 90s.

Much of the US will see pleasant highs of 70s and lower 80s before a strong cold Canadian system tracks deep into the central US late next week. Extended forecasts for the period between September 12th and September 18th show that the aforementioned Canadian weather system will track across the northern US and Midwest, extending further south into Texas and the Gulf Coast. This will lead to lower-than-seasonal cooling demand and will even spur some heating demand over the Midwest where overnight lows may drop to the 30s and 40s. However, the cold spell is expected to last only for a couple of days, and the lack of additional cold blasts will allow temperatures to return to comfortable levels, eliminating fears of early winter season price spikes.

With readings across most of the US set to range in the 70s and 80s during the third week of September, cooling demand will remain low, paving the way for massive inventory builds which will further narrow the five-year-average deficit. Only the West is expected to remain warmer than normal.

According to AccuWeather.com, the high in New York on September 9th will be 73 degrees Fahrenheit, 5 below normal, before sliding back to as much as 65 degrees, 9 beneath usual, nine days later. Detroit will see readings peaking at 76 degrees on September 8th, matching the seasonal, followed by a drop to as much as 64 degrees on September 14th.

To the South, Texas City will see readings max out at 89-91 degrees between September 7th and September 11th, 2-3 degrees above usual, before easing to as much as 81 degrees on September 14th. On the West Coast, the high in Los Angeles on September 8th will be 87 degrees, 3 above usual. A brief drop to seasonal levels will follow but highs will once again surge into the higher 80s and lower 90s between September 14th and September 17th.

Technical support and resistance levels

According to Binary Tribune’s daily analysis, October natural gas futures’ central pivot point stands at $3.807. In case the contract penetrates the first resistance level at $3.834 per million British thermal units, it will encounter next resistance at $3.874. If breached, upside movement will probably attempt to advance to $3.901 per mBtu.

If the energy source drops below its first support level at $3.767 per mBtu, it will next see support at $3.740. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.767 per mBtu.

In weekly terms, the central pivot point is at $3.884. The three key resistance levels are as follows: R1 – $3.987, R2 – $4.181, R3 – $4.284. The three key support levels are: S1 – $3.690, S2 – $3.587, S3 – $3.393.