Natural gas trading outlook: futures extend gains on end-week cold weather

Natural gas rose for a second day on Wednesday on speculations that below-average temperatures across the Midwest and Northeast through the end of the week will induce considerable heating demand. However, extended weather forecasts showing mild conditions across most of the US in the first 10 days of November kept gains in check.

On the New York Mercantile Exchange, natural gas for delivery in December traded at $3.797 per million British thermal units at 15:26 GMT, up 1.77% on the day. Prices varied in a daily range between a one-week high of $3.800 and $3.696. The power-plant fuel gained 2.58% on Tuesday to $3.731, having earlier touched a fresh 11-month low of $3.620.

According to NatGasWeather.com, natural gas demand over the next seven days will be moderate compared to normal, with a neutral weather trend between November 5-11.

The East Coast will be affected by cooler temperatures and showers today. On Friday a Canadian weather system will bring freezing temperatures and areas of light snowfall to the Great Lakes and eastern US. The southeast people will face cooler than normal temperatures as overnight lows drop into the upper 30s, pushing heating demand to stronger than normal. However, above-average temperatures will come back early next week over the central and southern U.S.

On November 5th and 6th the U.S. will enjoy comfortable readings, NatGasWeather.com reported, but chilly weather with cooler-than-normal readings will dominate the Midwest, Northeast and West Coast. The remainder of the US will enjoy mild weather, keeping national heating demand limited to moderate and paving the way for additional above-average inventory builds.

Temperatures

According to AccuWeather.com, readings in New York on November 2nd will range between 38 and 47 degrees Fahrenheit, well below the seasonal 47-60, before jumping back to the above-average 44-57 on November 6th.

Boston will see readings drop to 44 degrees on November 2nd, 12 below usual, followed by a rebound to 54 degrees five days later. Chicago will range between 35 and 42 degrees on Saturday, compared to the average 42-58, but will warm up to 39-54 on November 6th.

Down South, temperatures in Houston will range between 67-80 degrees through November 3rd, 6-7 above normal, before falling to seasonal levels between 46-63 on November 10th. On the West Coast, Los Angeles will reach 79 degrees tomorrow, 2 above usual, before easing to 73 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 week’s mostly seasonal and above-seasonal readings across the US. Natural gas inventories are expected to have risen by around 85-90 billion cubic feet in the seven days through October 24th, compared to the five-year average increase of 59 bcf and the 45-billion-cubic-feet gain during the comparable period a year ago.

Pivot points

According to Binary Tribune’s daily analysis, December natural gas futures’ central pivot point stands at $3.705. In case the contract penetrates the first resistance level at $3.789 per million British thermal units, it will encounter next resistance at $3.848. If breached, upside movement may attempt to advance to $3.932 per mBtu.

If the energy source drops below its first support level at $3.646 per mBtu, it will next see support at $3.562. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.503 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.