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Natural gas trading outlook: futures climb as EIA report eyed

Natural gas futures climbed during early trade in Europe today, paring some of Tuesdays moderate losses. Traders have priced in a moderately bullish cool Canadian system, due to impact US temps this week, and now look to US natgas inventories for further direction.

Front-month natural gas futures for settlement in November on the New York Mercantile Exchange traded at $4.138 per million British thermal units (mBtu) at 10:27 GMT, up 0.41% for the day. Prices ranged from $4.119 to $4.140 per mBtu. The contract dropped 0.79% on Tuesday, having added 3.1% on Monday.

Looking past the early heating hype, the main focus of investors today and tomorrow will be the Energy Information Administration (EIA) report, due for release at 14:30 GMT Thursday. Analysts expect a build of well over 100 billion cubic feet, highlighting the peak of Fall shoulder season. Should the injection meet expectations, it would be the twenty third straight week of above-average builds.

“Today will likely bring some positioning going into tomorrow’s EIA weekly report, which is expected to bring in another much larger than normal build with estimates around 105-109 Bcf,” analysts at NatGasWeather.com wrote in a note to clients today. “With a cooler northern US pattern beginning to take shape, stronger heating demand should be expected over the coming weeks.”

The market seemed well-saturated on the bull side by late Tuesday, allowing traders to cash in profits, pushing the contract down in the red, though still well above earlier levels. A set of cooler Canadian systems was on track to lower temps in highly-populated areas in the Midwest and Northeast beginning this weekend, pushing up heating outlooks, and natgas prices.

“The initial system this weekend “is not exceptionally cold, but the pattern will be relentless where every few days a fresh burst of chilly Canadian air will cross the US border,” the analysts at NatGasWeather.com wrote. “We believe weather patterns will remain at least moderately bullish, and if cooler temperatures find success pushing into the northeastern US coastline, it would be potentially strongly bullish.”

US weather outlook

New York will welcome October with a rainy and somewhat cooler Wednesday, according to AccuWeather.com. Temperatures will range the seasonal 59-68 degrees Fahrenheit. Temps will remain little changed through Friday, before a cooler weekend. Chicago is having a pleasant day today, with plenty sun and temps at 61-66 degrees Fahrenheit. Readings will climb to above 70 on Thursday, before dropping 10 degrees on Friday and a further 10 on Saturday, for chilly temp highs about 50.

Down South, Houston will be somewhat warmer than usual through Friday, with temperature highs in the upper 80s, several above average. By the weekend, readings will have dropped to a comfortable few below normal. Over on the West Coast, Los Angeles will have a pretty normal day, highs in the mid 80s. Readings will jump some 10 degrees tomorrow, and a further 5 by Friday to push triple digits into the weekend.

Technical support and resistance levels

According to Binary Tribune’s daily analysis, November natural gas futures’ central pivot point stands at $4.132. In case the contract penetrates the first resistance level at $4.167 per million British thermal units, it will encounter next resistance at $4.212. If breached, upside movement will probably attempt to advance to $4.247 per mBtu.

If the energy source drops below its first support level at $4.087 per mBtu, it will next see support at $4.052. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $4.007 per mBtu.

Do you agree with NatGasWeather.com analysts about a 105-109 Bcf build to be reported tomorrow?

Share your thoughts in the comments below.

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