Natural gas trading outlook: futures ease on mild weather

Natural gas fell on Monday, snapping four straight session of gains, as weather forecasts saw no significant changes over the weekend, calling for widespread mild conditions across the US.

Natural gas for delivery in June traded 0.72% lower at $2.756 per million British thermal units at 8:10 GMT, shifting in a daily range between $2.776 and $2.738. The contract rose 0.9% on Friday after surging 5.6% the previous day, settling the week 8.1% higher at $2.776 per mBtu.

Thursdays jump came as the Energy Information Administration released a slightly bullish inventory report. The government agency said that US natural gas stockpiles rose by 81 billion cubic feet in the week ended April 24th, below analysts median estimate of +85 bcf. The five-year average gain for the period was +55 bcf, while supplies rose by 77 bcf during the comparable period a year earlier.

Total gas held in US storage hubs amounted to 1.710 trillion cubic feet, narrowing the deficit to the five-year average of 1.785 trillion to 4.2%, or 75 bcf, from 5.8% a week earlier. Inventories were at a surplus of 76.5% compared to year-ago stockpiles of 969 bcf.

However, extended forecasts reinforcing bearish sentiment limited any excessive gains. According to NatGasWeather.com, natural gas demand in the US will be very low compared to normal through May 9th.

Pleasant temperatures have spread across most of the country, with highs in the uppers 60s and 70s over the North and 70s and 80s down South. Many regions continue to experience typical Spring weather with showers and thunderstorms, including Texas, the Rockies and the Plains. The southern Great Lakes and Ohio Valley will see similar conditions this week as well. The West is off to a quite comfortable start to the week before a Pacific weather system arrives on Tuesday into Wednesday, pushing temperatures several degrees below normal.

Next week, active weather in a typical Spring pattern will continue over much of the US, with the majority of the country expected to enjoy near-normal conditions, keeping both heating and cooling demand curbed. The east-central US has the best chances of being slightly warmer than normal, NatGasWeather.com said, while parts of the West are a few degrees cooler. The South will also see periods of slight cooling as weather systems with showers pass through, keeping the region from becoming too hot and limiting cooling demand.

This Thursdays inventory report is expected to show a slightly larger-than-average gain, around +70-75 bcf, as cooler temperatures over the North last week induced slightly stronger heating demand. The five-year average build for the week ended May 1st is +68 billion cubic, while stockpiles gained 75 bcf during the comparable period a year earlier.

Next weeks report, due out on May 14th, will likely reflect a larger gap to the average, as temperatures even across the North remain near seasonal. The five-year average inventory gain for the seven days ended May 8th is +82 bcf, while stockpiles rose by 101 bcf a year earlier.

Readings

According to AccuWeather.com, readings in New York will peak at 83 degrees Fahrenheit on May 5th, 15 above usual, and will remain in the upper 70s and low 80s through the third week of May. Chicago will peak at 61 degrees tomorrow, 6 beneath the average, followed by a warm-up into the mid and high 70s through mid-May.

Down South, Houston will enjoy seasonal weather this week as readings peak at 83-84 degrees, followed by a slight cooling of a few degrees next week. On the West Coast, highs in Los Angeles will be 66-70 degrees through May 10th, compared to the average of 74, before briefly peaking in the high 80s the next few days.

Pivot points

According to Binary Tribune’s daily analysis, June natural gas futures’ central pivot point stands at $2.763. In case the contract penetrates the first resistance level at $2.813 per million British thermal units, it will encounter next resistance at $2.849. If breached, upside movement may attempt to advance to $2.899 per mBtu.

If the energy source drops below its S1 level at $2.727 per mBtu, it will next see support at $2.677. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.641 per mBtu.

In weekly terms, the central pivot point is at $2.686. The three key resistance levels are as follows: R1 – $2.890, R2 – $3.005, R3 – $3.209. The three key support levels are: S1 – $2.571, S2 – $2.367, S3 – $2.252.