Natural gas trading outlook: futures hover near 11-month low on weather

Natural gas fell and hovered near the lowest in 11 months as weather forecasts remained mostly unchanged and called for mild temperatures across the US, with few exceptions, through the first week of November.

Natural gas for delivery in November traded at $3.595 per million British thermal units at 11:57 GMT, down 0.77% on the day, having shifted in a daily range of $3.644-$3.586. The energy source fell 3.8% last week, having touched an 11-month low of $3.559 on Friday.

According to NatGasWeather.com, natural gas demand over the next seven days will rise from low to moderate, compared to normal, while keeping a neutral weather trend between November 3rd and November 9th.

The southern and eastern parts of the US will enjoy above-normal temperatures in the next few days, with highs reaching the 70s and 80s, inducing light late season cooling demand.

More importantly, pacific storms will track across the northern Rockies and Plains on Monday, carrying rain and below-normal temperatures, and will move into the Midwest. Once the weather system reaches the Great Lakes on Wednesday, a second much colder Canadian system will enter the Northeast, introducing the first threat of below freezing temperatures and light snowfall, driving considerably higher heating demand.

Although the below-usual readings are projected to be contained within the Northeast and Northwest, which will render the cold pattern less impressive compared to what market players would want, the cold blast is projected to also push into the Southeast this weekend, sending lows down into the 30s.

However, NatGasWeather.com reported that as the aforementioned weather systems exits the Northeast next week, there probably wont be enough cold threats for a possible follow-through buying into the natural gas market, at least through November 9th. The central and southern US are expected to be warmer than usual.

Temperatures

According to AccuWeather.com, readings in New York tomorrow will range between 60-70 degrees Fahrenheit, above the average of 46-60, before they drop to 40-50 on November 2nd. The low in Chicago on October 29th will be 41 degrees, 1 below average, before rising to 46 degrees on November 4th, 6 above usual.

Down South, temperatures in Houston will max out at 80 degrees on October 30th, 2 above normal, and are expected to remain mostly seasonal through the first 10 days of November. On the West Coast, Los Angeles will reach 87 degrees on Wednesday, compared to the average of 77, before easing to 75 degrees on November 3rd.

Supplies

The Energy Information Administration reported on Thursday that US natural gas stockpiles rose by 94 billion cubic feet (bcf) during the week ended October 17th, compared to analysts’ projections for a jump in the range of 95-98 bcf. This was the 27th consecutive above-average weekly build.

Total gas held in US storage amounted to 3.393 trillion cubic feet as of last week, narrowing the gap to the five-year average of 3.731 trillion to 9.1%. Year-on-year, gas levels were 9.0% lower.

The EIA is expected to report the 28th consecutive above-average weekly build this Thursday, given last weeks mostly seasonal and above-seasonal readings across the US. Natural gas inventories are expected to have risen by around 90 billion cubic feet in the seven days through October 24th, which would narrow the five-year average deficit by another 20+ bcf.

Pivot points

According to Binary Tribune’s daily analysis for Monday, November natural gas futures’ central pivot point stands at $3.612. In case the contract penetrates the first resistance level at $3.665 per million British thermal units, it will encounter next resistance at $3.707. If breached, upside movement may attempt to advance to $3.760 per mBtu.

If the energy source drops below its first support level at $3.570 per mBtu, it will next see support at $3.517. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.475 per mBtu.

In weekly terms, the central pivot point is at $3.642. The three key resistance levels are as follows: R1 – $3.726, R2 – $3.828, R3 – $3.912. The three key support levels are: S1 – $3.540, S2 – $3.456, S3 – $3.354.