Natural gas futures weekly recap, September 22 – September 26

Natural gas rose on Friday for a fourth day in five this week as market players looked past another above-average weekly build in US gas inventories, eyeing an upcoming cold Canadian front that may induce early heating demand. Some investors also feared supplies may not be adequate enough before the replenishment season comes to an end.

On the New York Mercantile Exchange, natural gas futures for delivery in November added 0.37% on Friday to settle the week 3.2% higher at $4.029 per million British thermal units (mBtu). Prices ranged between Fridays one-week high of $4.040 and Wednesdays two-week low of $3.845 per mBtu. The October contract expired yesterday.

The energy source rose through the second half of the week as weather forecasting agencies predicting a cold Canadian front to hit the northern US and the Midwest late next week fueled speculations about early winter heating demand, offsetting bearish sentiment spurred by EIAs weekly storage data.

The US Energy Information Administration (EIA) reported the build at natural gas inventories for the week ended September 19th to largely meet expectations at 97 billion cubic feet (Bcf) but also exceed the five-year average gain of 79 Bcf.

The figure represents the 23rd straight week of above-average injections, and with 2.988 trillion cubic feet of natural gas in storage, the deficit to the 5-year average was narrowed to 12.5%, and 11.4% to to year-ago levels. The series also logs the highest 20-week build in more than 20 years.

The next two weeks will likely see builds in the triple digits, analysts say, as mild temps for this and the following week ease both heating and cooling.

Weather outlook

Investors are closely monitoring a southbound cool Canadian system, due to reach the US late next week. The initial blast will be over low-natgas use states, though by October 6th the system will have moved over the Midwest, and the Northeast later on, adding to the possibility of sizable heating demand.

“The markets should know by now cooler temperatures are coming to the northern US, with below freezing temperatures to many states and highs in the 50s, potentially only in the
40s,” analysts at NatGasWeather.com wrote in a note to clients on Friday. “In reality, it’s not exceptionally cold, but will likely garner enough hype to get the markets attention.”

With total natural gas in storage a sizable amount below the 5-year average, the market is exceptionally sensitive to signs of another brutally cold winter. The possibility of early cold could provide enough upside to completely disregard bulky builds to come, as bulls look to grab early winter hype.

“For now, we are seeing a greater threat of colder temperatures than warmer ones,” the analysts at NatGasWeather.com wrote. But the pattern for next week “clearly will provide very good nat gas build weather as the next two come in well over 100 Bcf.”

According to AccuWeather.com, New York is set for a rainy and cloudy week, with mostly seasonal or little-above seasonal temperatures. The high on October 1st will be 71 degrees Fahrenheit, 2 above average, before dropping to 67 on October 6th. Chicago will enjoy sunny and pleasant conditions early next week, followed by a rainy second part with occasional thunderstorms. Readings will peak at 73-74 degrees on October 1st and October 2nd, 5-6 above usual, before a decent cooling sets, lowering highs to 58 degrees on October 8th, while the low at 36 degrees will be 12 beneath seasonal.

Down South, Houston will enjoy mostly sunny and pleasant weather through the middle of October. Highs will reach 87-88 degrees during the entire week, compared to the average of 85, before easing to 80-82 degrees between October 4th-6th. Lows will be in the range of 60-64 degrees Fahrenheit, slightly below the average of 64.

On the West Coast, Los Angeles will enjoy sunny weather with highs maxing out at the seasonal 81 degrees on October 1st, before surging to as much as 90 degrees on October 5th. A follow-up cooling is expected to bring highs at around 80 degrees between October 9th and October 15th, little above the average, while lows will hold in the range of 59-65 degrees, compared to the average of 59-60.

Technical support and resistance levels

According to Binary Tribune’s daily analysis for Monday, November natural gas futures’ central pivot point stands at $4.013. In case the contract penetrates the first resistance level at $4.056 per million British thermal units, it will encounter next resistance at $4.084. If breached, upside movement will probably attempt to advance to $4.127 per mBtu.

If the energy source drops below its first support level at $3.985 per mBtu, it will next see support at $3.942. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.914 per mBtu.

In weekly terms, the central pivot point is at $3.971. The three key resistance levels are as follows: R1 – $4.098, R2 – $4.166, R3 – $4.293. The three key support levels are: S1 – $3.903, S2 – $3.776, S3 – $3.708.