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Natural gas trading outlook: futures head for weekly gain

Natural gas rose for a fourth day this week after the Energy Information Administration printed a smaller-than-average inventory build on Thursday, while the latest mid-July weather data continued to struggle on finding a definitive pattern.

Natural gas for delivery in August traded 0.53% higher at $2.837 per million British thermal units at 08:19 GMT, shifting in a daily range between $2.847 and $2.825. The contract rose 1.4% on Thursday, reversing a 1.7% decline the previous day, and is up 2.5% for the week so far.

Thursdays weekly report by the EIA registered a build of 69 billion cubic feet in US natural gas inventories during the week ended June 26th, largely in line with analysts median forecast for a gain of 70 bcf but below the five-average build of 75 bcf and 102 bcf during the comparable period last year.

Total gas held in US storage hubs amounted to 2.577 trillion cubic feet, narrowing a surplus to the five-year average of 2.548 trillion to 1.1% from 1.4% during the previous week. Supplies were also at a surplus of 34.6% compared to the year-ago inventories of 1.915 trillion.

Short-term weather focus this week has been on comfortable conditions across the eastern and central US as weather systems with showers, thunderstorms and cooler-than-normal temperatures track through, while the West remained hot and the South and Southeast got hotter after experiencing somewhat cooler weather earlier in the week.

Lower cooling demand this week due to the aforementioned pleasant conditions will be reflected in next Thursdays inventory report, which will likely show a build exceeding the average, but not by much. Early estimates call for a gain of slightly over 85 bcf in the seven days ended July 3rd, compared to the five-year average inventory gain of 75 bcf, while stockpiles jumped by 94 bcf a year earlier.

Much of the US, however, will warm-up this weekend through most of next week as high pressure expands out of the West, causing widespread highs in the 80s through 100s that would temporarily boost cooling demand.

Cooler Canadian systems are anticipated to push into the northern and eastern US starting next weekend, but whether that will set up a more widespread bearish pattern will depend on the outcome of their battle with the ridge of high pressure blocking them. The West Coast will cool to some extent as Pacific weather systems arrive, shifting high pressure off the western into the central US, including Texas, which will become the nation’s new hot spot.

Readings

According to AccuWeather.com, the high in New York on July 5th will be 75 degrees Fahrenheit, 9 below usual, before jumping back into the low-mid 80s through mid-July. Chicago will fail to exceed 73 degrees today, 11 beneath normal, but will reach the seasonal 84 degrees on July 6th.

Down South, temperatures in Houston will peak at 92 degrees today, 1 above usual, and will remain at or slightly above the average through July 11th. To the West, Sacramento will reach 95 degrees tomorrow, 4 above normal, and will drop to 88 degrees on July 7th.

Pivot points

According to Binary Tribune’s daily analysis, August natural gas futures’ central pivot point stands at $2.834. In case the contract penetrates the first resistance level at $2.873 per million British thermal units, it will encounter next resistance at $2.924. If breached, upside movement may attempt to advance to $2.963 per mBtu.

If the energy source drops below its S1 level at $2.783 per mBtu, it will next see support at $2.744. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.693 per mBtu.

In weekly terms, the central pivot point is at $2.791. The three key resistance levels are as follows: R1 – $2.848, R2 – $2.927, R3 – $2.984. The three key support levels are: S1 – $2.712, S2 – $2.655, S3 – $2.576.

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