Natural gas trading outlook: futures head for weekly gain

Natural gas eased on Friday but headed for a sizable weekly jump amid forecasts for cooler weather across the US Midwest and Northeast next week.

Natural gas for delivery in May traded 0.34% lower at $2.675 per million British thermal units at 8:29 GMT, shifting in a daily range of $2.693-$2.661. The contract gained 2.8% on Thursday to $2.684, having added almost 4% the previous two sessions.

The Energy Information Administration reported yesterday that US natural gas stockpiles expanded by 63 billion cubic feet in the week ended April 10th, exceeding analysts median estimate for a 53-55 bcf gain. This compared to the five-year average inventory gain for the period of 35 billion cubic feet, while supplies rose by 22 bcf during the same week a year earlier.

Total gas held in US storage hubs amounted to 1.539 trillion cubic feet, narrowing a deficit to the five-year average of 1.684 trillion to 8.6% from 10.5% a week earlier. Supplies were at a surplus of 81.7% to year-ago inventories of 847 bcf.

The bearish supply report, however, failed to induce a strong downside move amid projections for somewhat higher natural gas demand in the US through the end of April. According to NatGasWeather.com, consumption will remain low compared to normal this week, before jumping to moderate as of next week due to a cooler weather trend for the Midwest and Northeast during Aprils last couple of weeks.

The southeastern US will see scattered showers and thunderstorms as a weather system tracks through, preventing readings from becoming too hot, while the Great Lakes and Ohio Valley continue to enjoy mild temperatures peaking in the 60s and lower 70s.

Heating demand for the remainder of April will be determined mainly by two Spring storms. The first one, currently pushing out of the Rockies, will strengthen into a strong south-central US storm during the weekend. However, it will fail to tap any truly cold Canadian air and will only bring a brief cooling to the Great Lakes and East. The Southwest and California will see highs reach the 70s and 80s the next few days.

A more significant storm is expected to develop late this weekend and last for most of the next workweek, NatGasWeather.com reported, impacting much of the central and eastern regions of the country with heavy showers. It will send overnight lows across the Midwest into the 20s and 30s, but will also spill cooler air into the South, limiting cooling demand. Meanwhile, high pressure will continue to dominate the West Coast and far southern US, keeping readings near normal or somewhat warmer.

Next Thursdays inventory report will likely reflect a larger-than-average build as well as natural gas demand during the current week remains low. The five-year average inventory gain for the week ended April 17th is +46 billion cubic feet, while stockpiles grew by 45 bcf during the comparable period a year earlier.

Temperatures

According to AccuWeather.com, readings in New York will peak at 74 degrees Fahrenheit on April 19th, 11 above usual, before easing to the upper 50s and lower 60s for the rest of the month. The high in Chicago today will be 70 degrees, 10 above normal, followed by a cooling to the mid-high 50s through April 25th.

Down South, Houston will see readings max out in the low-mid 80s through April 26th, compared to the average 79-81, while on the West Coast Los Angeles reaches 79 degrees today, 6 above usual, before dropping to the upper 60s and lower 70s through April 27th.

Pivot points

According to Binary Tribune’s daily analysis, May natural gas futures’ central pivot point stands at $2.640. In case the contract penetrates the first resistance level at $2.734 per million British thermal units, it will encounter next resistance at $2.785. If breached, upside movement may attempt to advance to $2.879 per mBtu.

If the energy source drops below its S1 level at $2.589 per mBtu, it will next see support at $2.495. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.444 per mBtu.

In weekly terms, the central pivot point is at $2.575. The three key resistance levels are as follows: R1 – $2.645, R2 – $2.780, R3 – $2.850. The three key support levels are: S1 – $2.440, S2 – $2.370, S3 – $2.235.