Natural gas trading outlook: futures rise ahead of EIA inventory data

Natural gas gained on Thursday after three straight daily losses ahead of government data that will likely show a significant withdrawal in US natural gas stockpiles, once again forming deficits to the five-year average inventory level. Gains, however, were capped by extended forecasts calling for a warm-up across the majority of the US.

Natural gas for delivery in April traded 0.17% higher at $2.867 per million British thermal units at 9:34 GMT, shifting in a daily range of $2.888-$2.863. The contract declined by 0.93% yesterday to $2.862, a third straight session of losses. Prices are down ~3.6% so far this week.

The Energy Information Administration will likely report at 15:30 GMT a withdrawal of 235-245 billion cubic feet in US natural gas stockpiles in the seven days through February 20th. If confirmed, this would be almost double the five-year average decline for the week of 131 bcf, turning surpluses into deficits of ~50 bcf. Stockpiles fell by 117 bcf during the comparable period a year earlier.

Next weeks report is also expected to show a draw well above the average of -115 bcf as last weekend and this weeks cold blasts across the majority of the US are taken into account. The EIA will likely report another 220+ bcf inventory decline on March 5th, expanding deficits to 100 – 150 bcf. An upcoming moderation in temperatures across large parts of the country, however, will warrant smaller withdrawals to follow, but exactly how small remains still unclear.

Last weeks EIA report showed an inventory draw of 111 billion cubic feet to 2.157 trillion, forming a surplus of 2.8% to the five-year average of 2.099 trillion. The surplus over the year-ago inventory level of 1.479 trillion cubic feet expanded to 45.8% from 31.4% a week earlier.

US weather outlook

According to NatGasWeather.com, natural gas demand in the US will be easing from very high to high through March 4th, with a neutral weather trend for the West over the following seven days, while the central and eastern US remain cool. However, a warm-up is projected around March 9-10th.

The latest polar blast continues its sweep across the central and eastern US, spurring very strong national heating demand as readings decline to 15-30 degrees Fahrenheit below usual over the entire country, apart from the West. Northern Texas will see snow accumulations, while the core of the coldest air situated over the Midwest and Northeast will keep overnight lows in the single digits and below zero throughout Friday.

Late in the weekend and early next week, temperatures over the southern and eastern US will warm up but a new weather system will tap cold Canadian air into the central regions a few days later.

Weather systems carrying rain, snow and below-freezing temperatures will continue to track across the US next week, keeping readings across the central, northern and eastern US slightly below normal. However, weather patterns may see a significant shift around March 9-10th, leading to a warm-up to seasonal or even warmer weather across the entire US, apart from the far North.

Temperatures

According to AccuWeather.com, readings in New York on February 28th will range between 14 and 26 degrees Fahrenheit, compared to the average 31-45, and will shift between 30 and 42 degrees on March 4th. Temperatures are expected to remain near or slightly below usual through March 12th. Readings in Chicago will bottom at 1 degree today and tomorrow, compared to the average 25, and will remain below usual through March 11th.

Down South, Texas City will range between 43 and 51 degrees on Friday, compared to the average 53-67, before highs warm up to the upper 60s and lower 70s through March 5th. On the West Coast, Los Angeles will peak at 67 degrees tomorrow, 2 below usual, with temperatures set to remain 5-6 degrees below the average through March 6th before rising afterwards.

Pivot points

According to Binary Tribune’s daily analysis, April natural gas futures’ central pivot point stands at $2.881. In case the contract penetrates the first resistance level at $2.929 per million British thermal units, it will encounter next resistance $2.997. If breached, upside movement may attempt to advance to $3.045 per mBtu.

If the energy source drops below its first support level at $2.813 per mBtu, it will next see support at $2.765. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.697 per mBtu.

In weekly terms, the central pivot point is at $2.897. The three key resistance levels are as follows: R1 – $3.082, R2 – $3.191, R3 – $3.376. The three key support levels are: S1 – $2.788, S2 – $2.603, S3 – $2.494.