Natural gas reversed yesterdays gains as weather forecasts continued to point to a neutral trend for the next couple of weeks with moderate heating and cooling demand across the US.
On the New York Mercantile Exchange, natural gas futures for delivery in November traded 1.79% lower at $3.879 per million British thermal units at 14:10 GMT. Prices varied in a daily range between $3.947 and $3.873 per mBtu. The power-station fuel closed 1.51% higher on Tuesday at $3.957, partially offsetting Mondays 3.5%-decline.
Bearish sentiment continued to dominate the market as short-term weather forecasts called for mostly seasonal or little-below-average temperatures across the central and northern US, limiting demand for natural gas to moderate compared to normal.
According to NatGasWeather.com, cool blasts, coupled with showers and thunderstorms, will push temperatures across the central US and Northeast this weekend to below average, but nothing too excessive. At the same time, the southern and western parts of the country will remain very warm, with highs reaching into the upper 80s and lower 90s, which will drive moderate cooling demand.
Early next week, high pressure will build over the Midwest and Northeast, pushing readings to slightly higher than normal. However, a very active pattern will bring many weather systems with showers, thunderstorms and will set cooler-than-normal temperatures, possibly for a longer period of time. However, none of these systems will be cold enough to push readings sub-zero, and until freezing temperatures occur, the market wont have much to grind higher on. Meanwhile, the southern and most of the western US will remain slightly warmer than usual.
Inventory build
The recent comfortable readings are projected to lead to another quite larger than the average build due to be reported this Thursday. According to analysts’ preliminary estimates, the government agency will likely report a build of 105 billion cubic feet in the week ended October 3rd, exceeding last year’s 91-bcf injection during the comparable week and the five-year average increase of 84 billion cubic feet.
Next weeks build is projected to come leaner as warm weather in the high-consuming south states will stoke cooling demand, while the following injections are expected to fall further as we move through the autumn season.
“After next week, the 5-year average weekly build will begin dropping off as the peak of the second shoulder season ends,” NatGasWeather.com analysts wrote in a note on Wednesday. “Therefore, weather patterns need to keep pace with falling builds through colder US patterns, specifically over the Midwest and Northeast, to prevent additional gains on deficits from occurring.”
The power-station fuel plunged last Thursday after the Energy Information Administration reported that US natural gas storage expanded by 112 billion cubic feet in the week ended September 26th, exceeding a projected gain in the range of 105-109 billion cubic feet. The build was the twenty-fourth straight bigger-than-average injection, and narrowed the deficit to the five-year average to 11.4%, down from 55% in March.
Pivots
According to Binary Tribune’s daily analysis for Monday, November natural gas futures’ central pivot point stands at $3.930. In case the contract penetrates the first resistance level at $3.995 per million British thermal units, it will encounter next resistance at $4.032. If breached, upside movement will probably attempt to advance to $4.097 per mBtu.
Having already broken its first support level at $3.893 per mBtu, it will likely next see support at $3.828. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.791 per mBtu.
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