Natural gas trading outlook: bearish sentiment persists, mild weather in focus

Natural gas rose on Tuesday but gains were limited as weather forecasts saw no overnight change and continued calling for widespread mild conditions across the US to hold well into the third week of April.

Natural gas for delivery in May traded 1.62% higher at $2.693 per million British thermal units at 9:26 GMT, shifting in a daily range of $2.709-$2.652. The contract fell 2.32% on Monday to $2.650 after it jumped 4.15% on Thursday following a somewhat bullish inventory report by the Energy Information Administration.

The government agency said on Thursday that US natural gas stockpiles fell by 18 billion cubic feet during the seven days ended March 27th, exceeding analysts’ consensus estimate of -10 bcf. This compared to the five-year average withdrawal for the week of -22 bcf, while gas in storage declined by 71 bcf a year ago.

Total gas held in US hubs amounted to 1.461 trillion cubic feet, narrowing a deficit to the five-year average inventories of 1.651 trillion by only 0.1% from a week earlier to 11.5%. The surplus over year-ago stockpiles expanded to 75.4% from 63.6% the preceding week.

However, overall bearish weather sentiment limited gains. NatGasWeather.com said on Tuesday that natural gas demand in the US through April 13th will be low compared to normal, with a neutral weather trend for the following seven days.

Warmer readings will gradually establish over the southern and eastern US as the current week progresses. A weather system with showers and thunderstorms will track over the eastern US today, while a stalled cold front accumulates snowfall near the Canadian border. A cooler weather system will track across the Great Lakes and Northeast late this week through the weekend, while the intermountain West will see chilly weather with rain and snow as systems track from the Pacific Ocean, NatGasWeather.com said.

Active weather will persist across the US during the third week of April as weather systems with showers and thunderstorms track through, but temperatures will remain mild as northern systems fail to tap any truly cold Canadian air. The central, southern and eastern US will enjoy near or somewhat warmer-than-usual weather, while the West is slightly cooler due to Pacific systems with rain and snow.

“The latest weather data continues to show a mild and active pattern will rule the US through the third week of April, which we consider to be fairly bearish for weather sentiment,” NatGasWeather.com said.

Thursdays stockpiles report by the Energy Information Administration will likely bring an inventory build of around 15 bcf instead of an average decline due to last week’s seasonal and slightly warmer conditions. 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 following report, due on April 16th, will probably register a slightly larger than average build due to this week’s widespread mild conditions. The five-year average inventory gain for the week ended April 10th is +35 billion cubic feet, while supplies rose by 22 bcf during the same week a year earlier.

Readings

According to AccuWeather.com, New York will see temperatures peak at 43-45 degrees Fahrenheit on April 8-9th, compared to the average 58-59, before reestablishing in the 60s afterwards. Readings in Chicago will max out at 52 degrees tomorrow and will hit 71 degrees the day after, 15 above usual, before retreating to the mid-upper 50s and lower 60s through April 19th.

Down South, Texas City will see highs in the upper 70s and lower 80s through April 16th, compared to the normal 74-76, followed by a cooling to the lower 70s over the next six days. Los Angeles will be slightly cooler than usual this week as temperatures max out at 67-71 degrees, compared to the average 72, before establishing in the mid 70s through April 14th.

Pivot points

According to Binary Tribune’s daily analysis, May natural gas futures’ central pivot point stands at $2.660. In case the contract penetrates the first resistance level at $2.688 per million British thermal units, it will encounter next resistance at $2.725. If breached, upside movement may attempt to advance to $2.753 per mBtu.

If the energy source drops below its S1 level at $2.623 per mBtu, it will next see support at $2.595. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.558 per mBtu.

In weekly terms, the central pivot point is at $2.672. The three key resistance levels are as follows: R1 – $2.760, R2 – $2.808, R3 – $2.896. The three key support levels are: S1 – $2.624, S2 – $2.536, S3 – $2.488.