Natural gas trading outlook: futures fall for a fourth day before EIA data

Natural gas inched down on Thursday ahead of an expected larger-than-average inventory build to be reported by the Energy Information Administration, while temperatures across the US remain mostly comfortable.

Natural gas for delivery in July traded 0.49% lower at $2.833 million British thermal units at 07:59 GMT, shifting in a daily range of $2.845-$2.833. The contract slid 0.1% on Wednesday to $2.847 per mBtu, a third straight daily decline.

The Energy Information Administration is expected to report today that US natural gas stockpiles rose by 99-101 billion cubic feet in the week ended May 22nd, compared to the five-year average of 95 billion cubic feet, while supplies rose by 113 bcf during the comparable period a year earlier. A reading near or below the average would be considered as quite bullish, while a build of over 105 bcf – quite bearish.

Last weeks data showed that inventories rose by 92 billion cubic feet in the week ended May 15th, mismatching analysts’ projections for a 96-97-bcf gain which provided some support. Total gas held in US storage hubs amounted to 1.989 trillion cubic feet, narrowing a deficit to the five-year average of 2.024 trillion to 1.7%, or 35 bcf, from 2.0% a week earlier.

Next weeks report, due out on June 4th, is expected to show a larger gap to the average, as compared to this week’s data, with the five-year average build for the week ended May 29th pegged at 92 bcf, while supplies rose by 118 bcf a year earlier.

Weather

According to NatGasWeather.com, natural gas demand in the US will be low compared to normal through June 3rd. Very warm temperatures will engulf the southern and eastern US through the end of the week, with highs in the mid-upper 80s over major Mid-Atlantic cities. Readings will be quite comfortable across the West and central US, limiting demand for heating and cooling as highs hover in the 70s. Rains and thunderstorms continue over Texas and the southern Plains, while a stronger system pushes into the north-central US later this week to bring some cooling to the Northeast and Great Lakes during the weekend.

Active weather with showers and thunderstorms will continue across the US in early June. Most of the country will be warmer than usual next week amid widespread highs in the 80s and 90s, especially the East and West, while the central US is impacted by some cool Canadian blasts that will keep temperatures near normal. It still remains unclear how the trend over the North will develop late in the second week outlook. If high pressure manages to hold strong and keep new cool blasts from entering across the border, it would lead to above-normal temperatures and boost cooling demand, while the opposite scenario would reintroduce very comfortable Spring conditions.

According to AccuWeather.com, highs in New York will reach the low-mid 80s through May 30th, compared to the average 74-75, before dropping into the 70s the next five days. Chicago will peak at 83 degrees today and tomorrow, 9 above usual, followed by a brief 4-day cooling to the 60s, before 80s return afterwards.

Down South, highs in Texas City will be mostly seasonal the next couple of weeks, hovering between 85-87 degrees. On the West Coast, Los Angeles will reach 79 degrees tomorrow, 4 above usual, and will remain a few degrees warmer than normal the next few weeks.

Pivot points

According to Binary Tribune’s daily analysis, July natural gas futures’ central pivot point stands at $2.861. In case the contract penetrates the first resistance level at $2.901 per million British thermal units, it will encounter next resistance at $2.954. If breached, upside movement may attempt to advance to $2.994 per mBtu.

If the energy source drops below its S1 level at $2.808 per mBtu, it will next see support at $2.768. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.715 per mBtu.

In weekly terms, the central pivot point is at $2.994. The three key resistance levels are as follows: R1 – $3.075, R2 – $3.231, R3 – $3.312. The three key support levels are: S1 – $2.838, S2 – $2.757, S3 – $2.601.