Natural gas rebounded from a 1-month low touched on Tuesday as weather forecasters predicted below-normal temperatures in some high-consuming US areas. However, the lack of persistent freezing temperatures, probably throughout October, kept gains in check.
On the New York Mercantile Exchange, natural gas for delivery in November traded 1.02% higher at $3.855 per million British thermal units at 10:02 GMT, with prices holding in a daily range of $3.857-$3.823. The power-station fuel fell to an intraday low of $3.806 yesterday, the lowest since September 12th, and settled the day 2.55% lower at $3.816 per mBtu.
According to NatGasWeather.com, natural gas demand over the next seven days will be moderate compared to normal. The eastern parts of the country will be hit by a strong weather system today, carrying showers, thunderstorms and little-below-average temperatures. Additional reinforcing cool blasts will push overnight lows into the 40s and 30s on Friday and during the weekend, inducing modest heating demand.
However, those weather systems will not be significant enough to bring widespread and consistent freezing temperatures, leaving the markets supported, but also unable to advance much.
The far southern US will remain warmer than usual throughout the week with highs in the upper 80s, stoking late season cooling demand for the energy source.
Next week, numerous weather systems with showers, thunderstorms and slightly lower-than-usual temperatures will track across the Midwest and Northeast, and will also push deep into the Southeast. The southern US will continue to gradually cool, with the until-recently widespread highs in the 80s and 90s becoming rarer, easing the need for cooling. Both the southern and western parts of the country will remain near or little above average.
“We still see little to suggest a widespread hard freeze will push into the Midwest and Northeast anytime during October,” NatGasWeather.com analysts said in a note. “We are sticking with our view that until we see much colder weather patterns on the horizon, prices will either bounce around within the recent price range or finally get impatient enough to take out lower support.”
According to AccuWeather.com, the low in New York on Friday will be 58 degrees Fahrenheit, 8 above usual, before falling to 46 on October 20th. Chicago will drop to 43 degrees on Saturday and lows are expected to hold at around 46-57 degrees in the following seven days, 2-3 degrees above usual.
Down South, Houston will see highs of 83-85 degrees between October 16th and October 19th, compared to the average of 81-82, before dropping to 75-77 degrees on October 23rd-24th. On the West Coast, readings in Los Angeles will peak at 76 degrees on Saturday, 2 below seasonal, before jumping to 82 degrees on October 23rd.
Supply data eyed
Prices plunged last Thursday when 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. This was the 25th straight weekly above-average build.
This week’s supply data is projected to show a build of around 90 billion cubic feet, compared to the five-year average of 78 billion. If confirmed, this would be the closest net injection to the average since April. Near-term builds are expected to keep narrowing the deficit as average weekly injections begin to decrease after this week’s shoulder season peak.
Gas stockpiles were less than 11% below the five-year average in the week ended October 3rd, but this still was the biggest gap for this time of the year since 2005. The EIA said in its Short-Term Energy Outlook dated October 7th that inventories may rise to 3.532 trillion cubic feet by the end of the month, the lowest for this time of the year in six years.
Pivot points
According to Binary Tribune’s daily analysis, November natural gas futures’ central pivot point stands at $3.859. In case the contract penetrates the first resistance level at $3.912 per million British thermal units, it will encounter next resistance at $4.008. If breached, upside movement may attempt to advance to $4.061 per mBtu.
If the energy source drops below its first support level at $3.763 per mBtu, it will next see support at $3.710. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.614 per mBtu.
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