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Natural gas trading outlook: futures head for weekly loss amid seasonal weather

Natural gas rose on Friday but still headed for a sizable weekly decline as weather forecasting models showed no threat of prolonged periods of below-freezing readings. A triple-digit inventory injection reported by the EIA on Thursday also helped push the market down.

On the New York Mercantile Exchange, natural gas futures for delivery in November traded at $3.869 per million British thermal units at 13:30 GMT, up 0.62% on the day. Prices shifted in a daily range between $3.879 and $3.838 per mBtu. The contract touched a one-month low of $3.815 on Thursday and is down over 4% so far this week.

The Energy Information Administration reported on Thursday that US natural gas inventories rose by 105 billion cubic feet (bcf) in the week ended October 3rd, largely in line with analysts expectations for a jump by 105-110 bcf. Last weeks injection surpassed the 91-bcf build registered a year earlier during the comparable period and also exceeded the five-year average of 84 bcf.

Total gas held in US storage hubs now amounted to 3.205 trillion cubic feet, which was 10.1% below year-ago levels and 10.5% beneath the five-year average of 3.583 trillion, compared to a 55% deficit at the beginning of the replenishment season in April.

US weather

The power-station fuel failed to recover throughout the week as weather forecasts called for mostly seasonal weather across most of the US throughout October, with no outlook for prolonged periods of sub-zero readings.

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 stronger than usual 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 follow, bringing many weather systems with showers and thunderstorms, and setting cooler-than-normal temperatures, possibly for a longer period of time. Chilly Canadian air is expected to arrive late next week and around October 20th in the region, keeping readings slightly lower than usual. This will induce light to moderate heating demand as overnight lows drop to the 40s and 30s, and locally the 20s. However, none of these systems will be cold enough to push readings sub-zero for a protracted period of time, and until freezing temperatures set in, the market won’t have much to grind higher on. Meanwhile, the southern and most of the western US will remain slightly warmer than usual.

According to AccuWeather.com, readings in New York on October 12th will range between 61 and 48 degrees Fahrenheit, 3-4 degrees below seasonal, before jumping to 69-53 degrees on October 18th. Detroit will reach 69 degrees on October 13th, 7 above usual, with lows rising to 61 degrees, 17 above average.

To the South, the high in Texas City on October 12th will be 84 degrees, compared to the average of 82, before easing to 79 degrees a week later. On the West Coast, readings in Sacramento will max out at 90 degrees during the weekend, 10 above usual, before a following cooling pushes highs down to 72-74 degrees between October 18th and October 21st.

Pivot points

According to Binary Tribune’s daily analysis, November natural gas futures’ central pivot point stands at $3.867. In case the contract penetrates the first resistance level at $3.919 per million British thermal units, it will encounter next resistance at $3.993. If breached, upside movement will probably attempt to advance to $4.045 per mBtu.

If the contract breaks its first support at $3.793 per mBtu, it may extend its drop to $3.741. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.667 per mBtu.

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