Natural gas trading outlook: futures ease ahead of EIA stockpiles data

Natural gas fell on Thursday, remaining in a narrow weekly trading range, ahead of weekly EIA data that is expected to show a larger-than-average inventory build.

Natural gas for delivery in May traded 0.38% lower at $2.596 per million British thermal units at 7:45 GMT, shifting in a daily range of $2.605 2.586. The contract rose 1.2% yesterday to $2.606 per mBtu and is down ~1.6% for the week so far.

The Energy Information Administration is expected to report at 14:30 GMT that US natural gas inventories rose by 88 billion cubic feet last week as overall warm temperatures covered most of the US. If confirmed, this would narrow deficits to near 100 bcf. 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. A reading in the upper range of expectations, 95 bcf+, would be considered quite bearish, while a build of less than 83 bcf – bullish.

According to NatGasWeather.com, natural gas demand in the US will be moderate compared to normal through April 29th, with a slightly warmer weather trend for the western and central US over the following seven days, while the East warms up as well.

A cool blast with showers and thunderstorms is sweeping across Great Lakes and eastern US, pushing readings to below normal and inducing moderate heating demand over the next several days as overnight lows reach the 20s and 30s. Texas and portions of the southern US will see showers and severe thunderstorms, while the far southern US will be quite warm, with highs reaching the 80s, and locally 90s. The country’s western regions will remain mostly mild, with some periods of cooling.

Active weather will continue to dominate the US next week as well, in a typical Spring fashion with showers and thunderstorms. The northern US will see a brief mild break this weekend before one final reinforcing cold blast arrives next week. The eastern, central and western parts of the country will enjoy near-seasonal weather, while the South sees rounds of limited cooling demand as highs reach the 80s and locally 90s. Warmer temperatures will gradually engulf the north-eastern US end-April and early-May, while the remainder of the country becomes warmer than usual.

“Overall, we continue to view the pattern as slightly bearish through the rest of the month, and then more strongly so early in May as milder temperatures arrive into the northern US,” NatGasWeather.com said in a Wednesday mid-day update.

The following inventory report, due out on April 30th, will likely also reflect a larger-than-normal inventory build as overall mild readings persist. The five-year average build for the week ended April 24th is +55 bcf, while supplies rose by 77 bcf during the comparable period a year earlier.

Temperatures

According to AccuWeather.com, highs in New York on April 23-24th will be 53-54 degrees Fahrenheit, compared to the average 64, before rising back into the 60s afterwards. Temperatures in Chicago will peak in the mid 50s thorugh April 30th, below the usual 62-65 for the period, followed by a warm-up into the lower 60s.

Down South, Texas City will reach 87 degrees on April 26th, 9 above normal, before easing back to the lower 80s and upper 70s the following week. On the West Coast, Los Angeles will see readings max out at 67-68 degrees on April 23-25th, followed by a warm-up into the low 80s for the rest of the month.

Pivot points

According to Binary Tribune’s daily analysis, May natural gas futures’ central pivot point stands at $2.594. In case the contract penetrates the first resistance level at $2.634 per million British thermal units, it will encounter next resistance at $2.662. If breached, upside movement may attempt to advance to $2.702 per mBtu.

If the energy source drops below its S1 level at $2.566 per mBtu, it will next see support at $2.526. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.498 per mBtu.

In weekly terms, the central pivot point is at $2.601. The three key resistance levels are as follows: R1 – $2.726, R2 – $2.819, R3 – $2.944. The three key support levels are: S1 – $2.508, S2 – $2.383, S3 – $2.290.