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

Natural gas eased slightly on Thursday following two days of moderate gains before chillier weather across the northern US gives way to much warmer conditions on Friday, while investors awaited the release of weekly EIA inventory data.

Natural gas for delivery in June traded 0.58% lower at $2.591 per million British thermal units at 8:48 GMT, shifting in a daily range between $2.600 and $2.587. The contract rose 2.72% on Wednesday to $2.606 per mBtu and is up 0.9% for the week so far.

Todays EIA report is expected to show another above-normal inventory gain, around +85 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 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. 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.

According to NatGasWeather.com, natural gas demand in the US will be very low compared to normal through May 6th, with mild weather across the North the following seven days set to keep consumption limited.

A weather system tracking through the southeastern US will merge with a second one drifting across the Great Lakes, bringing slightly cooler-than-normal temperatures and periods of showers and thunderstorms over the east-central Atlantic Coast the next few days. However, higher readings will push into the southern Great Lakes and most of the eastern US on Friday through the weekend, 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, NatGasWeather.com reported. 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, while parts of the West are a few degrees cooler.

Next weeks inventory report, due out on May 7th, will likely reflect a near-average or slightly larger inventory gain due to the current week’s 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.

Readings

According to AccuWeather.com, readings in New York will peak at 60 degrees Fahrenheit on May 2nd, 7 below usual, before rebounding into the mid and upper 70s after may 4th. Chicago will peak at 50 degrees today, 15 beneath the average, followed by a warm-up into the mid 60s and low 70s as of tomorrow.

Down South, Texas City will enjoy seasonal weather as temperatures peak at 78-82 degrees through May 9th. On the West Coast, Los Angeles will reach 87 degrees today, 13 above usual, before dropping into the mid-low 70s as of May 3rd.

Pivot points

According to Binary Tribune’s daily analysis, June natural gas futures’ central pivot point stands at $2.576. In case the contract penetrates the first resistance level at $2.642 per million British thermal units, it will encounter next resistance at $2.677. If breached, upside movement may attempt to advance to $2.743 per mBtu.

If the energy source drops below its S1 level at $2.541 per mBtu, it will next see support at $2.475. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.440 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.