Natural gas trading outlook: futures slide ahead of EIA report

Natural gas fell for a fourth day in five ahead of an expectedly bearish government inventory report, while weather forecasts continued to call for widespread pleasant temperatures that would limit heating and cooling demand.

Natural gas for delivery in June traded 0.59% lower at $2.522 per million British thermal units at 08:46 GMT, shifting in a daily range between $2.534 and $2.511. The contract rose 0.9% on Tuesday to $2.537 per mbtu.

According to NatGasWeather.com, natural gas demand in the US will be low compared to normal the next few days, before dropping to very low through the weekend and much of next week.

The southeastern US will experience cooler weather with heavy showers and thunderstorms through Thursday as a weather system tracks through. The Midwest will see overnight lows in the 30s and lower 40s as another system tracks through, carrying rain and snow. However, higher temperatures will push into the southern Great Lakes and most of the eastern US later in the week, easing heating demand significantly, while the West remains dominated by high pressure with highs in the 70s and 80s.

Typical Spring weather will continue next week as well, with showers and thunderstorms across much of the country. Almost the entire US will enjoy near-normal temperatures, keeping both heating and cooling demand at bay, with only the east-central US expected to be slightly warmer than usual.

“With warmer May temperatures that we have been expecting still on track, we continue to view weathers pattern as quite bearish,” NatGasWeather.com said.

Temperatures

According to AccuWeather.com, readings in New York will peak at 57 degrees Fahrenheit on May 2nd, 10 below usual, before rebounding to 76 degrees on May 5-6th. Chicago will peak at 51 degrees tomorrow, 14 beneath the average, followed by a warm-up into the mid 60s and low 70s as of May 1st.

Down South, the high in Houston on May 1st will be seasonal at 82 degrees and will remain in the low-mid 80s through May 10th. On the West Coast, Los Angeles will reach 87 degrees today, 13 above usual, before dropping into the mid-low 70s as of May 2nd.

Stockpiles

The Energy Information Administration said last Thursday that US natural gas stockpiles rose by 90 billion cubic feet in the week ended April 17th, almost twice the five-year average gain of 46 bcf and slightly above analysts’ median projection of +88 bcf. Total gas held in US storage hubs amounted to 1.629 trillion cubic feet, narrowing a deficit to the five-year average of 1.730 trillion to 5.8% from 8.6% a week earlier. Inventories were at a surplus of 82.6% compared to a year ago.

This week’s EIA report is expected to show another above-normal inventory gain, around 85-90 billion cubic feet, due to last week’s widespread mild weather. 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.

The report after, due out on May 7th, will likely reflect a near-average or slightly larger inventory gain due to the current weeks chillier conditions across the northern US. Stockpiles rose on average by 68 billion cubic feet in the seven days ended May 1st, while gaining 75 bcf during the comparable period a year earlier.

Pivot points

According to Binary Tribune’s daily analysis, June natural gas futures’ central pivot point stands at $2.523. In case the contract penetrates the first resistance level at $2.559 per million British thermal units, it will encounter next resistance at $2.580. If breached, upside movement may attempt to advance to $2.616 per mBtu.

If the energy source drops below its S1 level at $2.502 per mBtu, it will next see support at $2.466. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.445 per mBtu.

In weekly terms, the central pivot point is at $2.597. The three key resistance levels are as follows: R1 – $2.639, R2 – $2.710, R3 – $2.752. The three key support levels are: S1 – $2.526, S2 – $2.484, S3 – $2.413.