Natural gas trading outlook: futures pause 2-day gains ahead of EIA report

Natural gas fell for the first time in three days before the Energy Information Administration likely reports a near-normal inventory withdrawal. A cold blast, expected to hit the northern US this weekend, kept losses checked.

Natural gas for delivery in April traded 0.82% lower at $2.896 per million British thermal units at 10:18 GMT, shifting in a daily range of $2.928-$2.892. The contract rose by 2.3% on Wednesday, adding to the prior sessions 5.1% jump.

According to NatGasWeather.com, natural gas demand in the US will be low-to-moderate compared to normal through March 25th, with a neutral weather trend for the following seven days.

A slight cooling and widespread showers are expected across the South today as weather systems track through, while the northern US sees several degrees of warming ahead of a cold blast that will arrive this weekend. Overnight lows across the Midwest and Northeast will drop into the teens and 20s, and below 10 degrees near the Canadian border, inducing a period of stronger heating demand. However, the truly cold temperatures will remain confined within these regions, allowing for the rest of the US to continue enjoying mild weather with widespread highs into the 60s through 80s.

The cold front will last through early next week, keeping the North cooler than usual before warming up mid-week. As the week progresses, weather systems carrying rain, snow and temperatures slightly below normal will track across the Great Lakes and eastern US, while the West remains mainly warm and dry. The central and eastern US also havent seen changes from recent forecasts that have been calling for near-normal conditions, with active weather systems passing through.

It will be important to monitor a strong cold blast moving across Canada on March 28-30th, NatGasWeather.com said, as it may develop in many ways, although it stands a greater chance of delivering only a quick blast of moderately cold air.

Readings

According to AccuWeather.com, readings in New York tomorrow will range between 32 and 36 degrees Fahrenheit, compared to the average 36-51, before establishing in the 50s after March 25th. Chicago will see temperatures peak at 55 degrees tomorrow, 7 above usual, but will turn slightly cooler than normal for the rest of the month, with highs mainly in the mid 40s.

Down South, the mercury in Houston will peak in the mid and upper 70s through March 29th, compared to the average 73-75. On the West Coast, highs in Los Angeles will range between 74 and 76 degrees through March 25th, above the normal 70-71, before jumping into the 80s the following four days.

EIA report

US natural gas stockpiles fell by 198 billion cubic feet in the seven days through March 6th, the EIA reported last Thursday. Total gas held in US storage hubs amounted to 1.512 trillion cubic feet, expanding a deficit to the five-year average of 1.737 trillion to 13.0%, or 225 bcf, from 7.7% a week earlier.

This was the last in a series of above-average withdrawals as the widespread thaw across the US curbed significantly national heating demand. Today’s supply report for the seven days ended March 13th is expected to show a decline of 40-50 bcf, compared to the five-year average draw of 45 bcf, while stockpiles slid by 69 bcf a year ago.

The report after, due on March 26th, is expected to register an inventory build, instead of a near-average decline, as the reach of Tuesday’s cold blast was limited to the Northeast and the rest of the US continues to enjoy mostly seasonal weather. The five-year average withdrawal for the week ended March 20th is 19 billion cubic feet, while the year-ago storage drop was 56 bcf.

The following report, due on April 2nd, may reflect a near-average inventory decline, depending on how this weekend’s cold blast plays out and for how long it persists.

Pivot points

According to Binary Tribune’s daily analysis, April natural gas futures’ central pivot point stands at $2.877. In case the contract penetrates the first resistance level at $2.978 per million British thermal units, it will encounter next resistance at $3.037.

If breached, upside movement may attempt to advance to $3.138 per mBtu. If the energy source drops below its S1 level at $2.818 per mBtu, it will next see support at $2.717. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.658 per mBtu.

In weekly terms, the central pivot point is at $2.751. The three key resistance levels are as follows: R1 – $2.840, R2 – $2.953, R3 – $3.042. The three key support levels are: S1 – $2.638, S2 – $2.549, S3 – $2.436.