Natural gas futures were lower during early trade in Europe today, after the most-traded contract failed to breach the key resistance at $4 yesterday, with an impressive 5% rally since Monday. Traders eye the upcoming weekly EIA log on natural gas inventory levels in the US later today, a report which triggers intense trading and big price movements.
Front-month natural gas futures for settlement in October on the New York Mercantile Exchange traded at $3.942 per million British thermal units (mBtu) at 9:37 GMT, down 0.30% for the day. Prices ranged from $3.940 to $3.963 per mBtu. The contract closed Wednesdays session down 0.75%, after adding ~5% over the previous two.
Investors eye the upcoming Energy Information Administration (EIA) weekly report on natgas inventory levels later today, with expectations of a 21st straight week of larger-than-average builds. The injection is projected to come at 84-88 billion cubic feet. Last week the deficit to the 5-year average total gas was narrowed to only 15.4%, down from a record 50% in March.
This week’s cold spell will likely have a positive impact on upcoming natgas inventory builds, further adding to builds momentum, as the market enters Fall shoulder season.
“Next week will likely again come in under 100 Bcf,” analysts at NatGasWeather.com wrote in a note to clients today. “But there should be some fairly hefty 100+ Bcf builds to follow.”
US weather outlook
The cold Canadian system is already tracking deep into the central US, bringing temperature troughs as low as 30-40 Fahrenheit at places. These places, however, are only in lightly populated regions, and will likely induce only minor heating demand. More importantly, the system will kill much of the cooling demand over the South in the coming days, bearing up natgas players. Meanwhile, the northern Midwest and the Northeast will also have quite cooler than normal temps for a significant time as reinforcing cool blasts draw track through the Great Lakes next week.
“We feel confident there will be limited chances for early season cold to become established,” NatGasWeather.com analysts said. “There will still be periods … of light heating demand.”
New York is set for a very warm, though cloudy Thursday, according to AccuWeather.com, with temperatures reaching as high as 83 degrees Fahrenheit, several above average. The high will plummet some 10 degrees tomorrow, and will remain a few below usual through to next week, with few days breaking above the average by end of September. Chicago will have a significantly cooler-than-normal week, with temps largely ranging lower to upper 50s, 15 degrees below average. Readings will slightly climb next week, though still at least several below normal.
Down South, Houston temps will be slightly above average today, between 76 and 93 degrees. Readings will slowly drop through to Sunday, and will moderate at a few below average next week. Over on the West Coast, Los Angeles is already quite warmer than normal, temps reaching as high as 90 today, 6 above the average. Temperatures will be climbing further, however, reaching as high as 12 above normal by Sunday and into next week.
Technical support and resistance levels
According to Binary Tribune’s daily analysis, October natural gas futures’ central pivot point stands at $3.962. In case the contract penetrates the first resistance level at $3.986 per million British thermal units, it will encounter next resistance at $4.019. If breached, upside movement will probably attempt to advance to $4.043 per mBtu.
If the energy source drops below its first support level at $3.929 per mBtu, it will next see support at $3.905. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.872 per mBtu.
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