Natural gas weekly recap, October 6 – October 10

Natural gas rose for the first time in three days on Friday as weather forecasts called for cooler-than-usual weather in the eastern US, but nevertheless marked a sizable weekly loss as outlook remained overall bearish with mostly seasonal readings across the US.

Natural gas futures for settlement in November rose by 0.36% on the New York Mercantile Exchange on Friday to settle the week 4.46% lower at $3.859 per million British thermal units. Prices ranged between a one-week high of $4.000 touched on Monday, and a one-month low of $3.815 hit on Thursday. The contract is up 3.7% from a year ago.

The power-station fuel made a small rebound on Friday as weather forecasts called for cooler-than-usual temperatures on the East Coast between October 20th and October 24th. However, the lack of consistent below-freezing temperatures paved the way for more above-average inventory builds to come, albeit expectedly leaner.

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, the high in New York on October 15th will be 74 degrees Fahrenheit, 10 above average, before dropping to as much as 53-57 degrees on October 21st-22nd, 5-10 below normal. Chicago will range between 64 and 54 degrees on October 16th, compared to the seasonal 63-46. Highs are expected to drop to as much as 50 degrees on October 22nd, with lows at 43 degrees, before a following warm-up pushes readings back up to the upper 60s in the next five days.

To the South, Houston will see temperatures maxing out at 81-84 degrees through October 20th, compared to the average of 80-81, followed by a slight cooling to the lower and mid-70s in the next seven days. On the West Coast, Los Angeles will reach 86 degrees tomorrow, 7 above average, before highs drop to the upper 70s and lower 80s through October 28th.

Supply data

Prices slid to the lowest in a month on Thursday after the Energy Information Administration reported 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 week’s 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. According to the EIA, inventories are expected to rise to 3.532 trillion cubic feet by the end of October.

Daily and weekly pivot points

According to Binary Tribune’s daily analysis for Monday, November natural gas futures’ central pivot point stands at $3.860. In case the contract penetrates the first resistance level at $3.887 per million British thermal units, it will encounter next resistance at $3.915. If breached, upside movement may attempt to advance to $3.942 per mBtu.

If the energy source drops below its first support level at $3.832 per mBtu, it will next see support at $3.805. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.777 per mBtu.

In weekly terms, the central pivot point is at $3.891. The three key resistance levels are as follows: R1 – $3.968, R2 – $4.076, R3 – $4.153. The three key support levels are: S1 – $3.783, S2 – $3.706, S3 – $3.598.