Natural gas trading outlook: futures advance on cooling demand

Natural gas rose on Monday, extending last weeks gains, as warm weather across most of the US spurred moderate to strong demand for cooling, lining up a series of slightly larger than average inventory builds.

Natural gas for delivery in July traded 2.65% higher at $2.823 per million British thermal units at 8:01 GMT, shifting in a daily range of $2.823 – $2.764. The contract slid 2.65% on Friday to $2.750 per mBtu, but still settled the week 6.2% higher, ending three consecutive weekly drops.

According to NatGasWeather.com, natural gas demand in the US will be moderate compared to normal through June 20th, and locally high across the Southeast, with near-normal temperatures projected for the following seven days across most the country.

The eastern, western and southern US will continue to experience very high afternoon highs the next few days, with the Southeast, including Florida, driving the nations strongest cooling demand as temperatures reach into the 90s. Meanwhile, Canadian weather systems tracking through the Midwest and Northeast with showers and thunderstorms will provide several degrees of cooling, keeping highs in the 70s and lower 80s, while also dropping temperatures over the South and East by a few degrees.

Active weather will continue during the fourth week of June as well, keeping temperatures near normal over most of the country, except for slightly warmer-than-usual readings across the Southeast, which will see high pressure strengthen this weekend. The north-central US will continue to be impacted by Canadian weather systems spilling cooler air that would keep temperatures near usual or a few degrees below, while also pushing readings down by a few degrees in adjacent regions.

Temperatures

According to AccuWeather.com, the high in New York today will be 77 degrees Fahrenheit, 2 below usual, before establishing in the lower 80s for the rest of the month. Chicago will peak at the seasonal 80 degrees today but active conditions through the end of June will cause temperatures to range between the low 70s and mid 80s, compared to the average 80-83 for the period.

Down South, Houston will reach 83-84 degrees the next couple of days, below the average 90, before warming up to seasonal afterwards. On the West Coast, the high in Los Angeles today will be 80 degrees, 2 above usual, and will remain in the low 80s through the end of June.

Inventories

The Energy Information Administration reported on Thursday that natural gas inventories rose by 111 billion cubic feet in the week ended June 5th, in line with analysts’ median forecasts for a 112-113 bcf jump and well above the five-year average build of 89 bcf. Total gas held in US storage hubs amounted to 2.344 trillion cubic feet, expanding a surplus to the five-year average of 2.300 trillion to 1.9%, or 44 bcf, from 1.0% a week earlier.

This weeks report will show another above-average build, but closer to the average. Early estimates call for a gain of around 100 bcf for the week ended June 12th, compared to the five-year average inventory increase of 87 billion cubic feet and the year-ago build of 112 bcf.

Next weeks number, due out on June 25th, will likely come in even closer to the average, with early projections pointing to an inventory build of around 90 bcf for the week ended June 19th, compared to the five-year average gain of 86 bcf and the year-ago one of 110 bcf.

Pivot points

According to Binary Tribune’s daily analysis, July natural gas futures’ central pivot point stands at $2.773. In case the contract penetrates the first resistance level at $2.803 per million British thermal units, it will encounter next resistance at $2.855. If breached, upside movement may attempt to advance to $2.885 per mBtu.

If the energy source drops below its S1 level at $2.721 per mBtu, it will next see support at $2.691. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.639 per mBtu.

In weekly terms, the central pivot point is at $2.765. The three key resistance levels are as follows: R1 – $2.907, R2 – $3.063, R3 – $3.205. The three key support levels are: S1 – $2.609, S2 – $2.467, S3 – $2.311.