Natural gas trading outlook: futures dip on mild weather

Natural gas fell for a fourth day in five as mild weather continued to dominate almost the entire US, with a brief warm-up set to establish seasonal readings across the North and East as well.

Natural gas for delivery in May traded 0.83% lower at $2.622 per million British thermal units at 8:29 GMT, shifting in a daily range of $2.645-$2.622. The contract inched up 0.2% to $2.644 on Monday after tumbling near 6% the previous three sessions.

According to NatGasWeather.com, natural gas demand in the US will be low-moderate compared to normal through April 6th, with a neutral weather trend for the West over the following seven days, while the central and north-eastern regions turn slightly warmer.

Another cool blast will sweep across the Northeast today, carrying rain, snow and cooler temperatures, before an expected warm-up takes part. The Great Lakes will see its first signs this afternoon before it spreads over most of the eastern US on Wednesday and Thursday, bringing highs into the 50s and 60s over the North, while readings across the South peak in the 70s and 80s. Texas will see some early season heating amid local highs in the mid-90s.

The warm-up will, however, quickly give way to another round of cooling on Friday through early next week, inducing higher heating demand for its duration. Lower temperatures will also push into the southern Plains and Texas, easing what cooling demand those regions had seen earlier. The West will remain mostly warm and dry, apart from the Northwest where Pacific systems will bring some cooling and showers.

As next week progresses, the US will see typical active Spring weather systems carrying showers and thunderstorms, NatGasWeather.com said. The central, southern and eastern US will enjoy seasonal or warmer weather, keeping heating demand at relatively low levels, while systems arrive over the West with showers and near or slightly cooler-than-normal temperatures.

Readings

According to AccuWeather.com, New York will see temperatures peak at 46-47 degrees on April 1-2nd, 9-10 below usual, before establishing in the low-mid 50s afterwards. Readings in Chicago will be seasonal today and reach 63 degrees on April 2nd but will later ease to the 50s through April 11th.

Down South, highs in Houston will max out at 79-85 degrees through April 3rd, above the normal 76, and will remain near-seasonal or slightly higher during the second week of April. On the West coast, Los Angeles will see temperatures peak in the mid-upper 70s through April 4th, compared to the average 71-72, before turning slightly cooler over the following 10 days.

Supplies

This week’s inventory report may reflect a near-average inventory decline as widespread seasonal and warmer weather dominated the majority of the country last week, although some regions saw light cooling demand as well. The five-year average withdrawal for the week ending March 27th is -22 bcf, while gas in storage declined by 71 bcf a year ago.

The following report, due on April 9th, will likely bring a small inventory build instead of an average decline as widespread mild weather persists this week. The five-year average inventory drop for the seven days ended April 3rd is -2 billion cubic feet, while stockpiles declined by 8 bcf during the comparable period a year earlier.

The Energy Information Administration reported last Thursday that US natural gas stockpiles rose by 12 billion cubic feet in the week ended March 20th, exceeding analysts’s median estimate of a build of 6-9 bcf. Total gas held in US storage hubs amounted to 1.479 trillion cubic feet, narrowing a deficit to the five-year average inventories of 1.673 trillion to 11.6% from 13.3% a week earlier. The surplus over year-ago stockpile levels expanded to 63.6% from 52.8% last week.

Pivot points

According to Binary Tribune’s daily analysis, May natural gas futures’ central pivot point stands at $2.642. In case the contract penetrates the first resistance level at $2.675 per million British thermal units, it will encounter next resistance at $2.707.

If breached, upside movement may attempt to advance to $2.740 per mBtu. If the energy source drops below its S1 level at $2.610 per mBtu, it will next see support at $2.577. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.545 per mBtu.

In weekly terms, the central pivot point is at $2.696. The three key resistance levels are as follows: R1 – $2.776, R2 – $2.913, R3 – $2.993. The three key support levels are: S1 – $2.559, S2 – $2.479, S3 – $2.342.