Natural gas trading outlook: futures steady ahead of EIA data

Natural gas was little changed on Thursday after three days of losses as investors awaited the Energy Information Administrations weekly inventory data, while weather forecasts continued to show varying solutions for the second half of July.

Natural gas for delivery in August traded 0.04% lower at $2.684 per million British thermal units at 09:47 GMT, shifting in a daily range of $2.699 – $2.679. The contract slid 1.1% on Wednesday to $2.685 and is down 5% for the week so far.

The Energy Information Administration is expected to report at 14:30 GMT that US natural gas stockpiles rose by 86 billion cubic feet in the week ended July 3rd, according to analysts median estimate, reflecting the tracked period’s pleasant conditions over the eastern and northern US. This compares to the five-year average inventory gain of 75 bcf, while supplies jumped by 94 bcf a year earlier. A reading of below 83 bcf would be considered as bullish and one above 89 – bearish.

Last Thursday’s data showed a build of 69 billion cubic feet during the week ended June 26th, largely in line with median forecasts. 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 preceding week.

Natural gas demand in the US will be moderate compared to normal for one more day, NatGasWeather.com said, before surging to high over the following five days as temperatures in many regions of the country become very warm to hot.

A strong weather system and an associated cool blast that had been recently sweeping across the central US and Great Lakes will fizzle today, allowing high pressure to rapidly build. The West will cool as Pacific weather systems arrive and shift high pressure over to the central and eastern US, resulting in highs in the mid 80s and low 90s swiftly spreading over the North and East in the coming days. Conditions over Texas and the southern Plains will become quite uncomfortable after Friday as highs establish in the mid 90s to lower 100s and will last through most of next week.

Pleasant temperatures over large parts of the country last weekend through the middle of the current week will result in a similar number for next Thursdays inventory report. However, this will add to surpluses at a faster pace as the five-year average gain for the week ended July 10th drops to 71 bcf. Supplies added 105 bcf during the comparable period a year earlier.

A weather system will bring slight cooling to the northern and eastern US early next week, NatGasWeather.com said, but high pressure over the southern and central regions of the country is expected to expand northward almost immediately, pushing temperatures back to very warm levels. The weather data have so far failed to produce a conclusive pattern for the north-central US during the second half of July, but Texas and the Plains are expected to remain hot through the end of the month. The interior West will also be warm going into the fourth week of July, while the coastal regions are affected by cooler Pacific systems.

Readings

According to AccuWeather.com, the high in New York on July 10th will be 85 degrees Fahrenheit, 1 above usual, while Chicago peaks at 72 degrees, 13 below usual, only to rebound to 84 degrees three days later.

Down South, temperatures in Houston will max out at 92-95 degrees through July 16th, compared to the usual 92, while to the West, highs in Los Angeles will be in the 70s for three more days, before jumping into the low-mid 80s afterwards.

Pivot points

According to Binary Tribune’s daily analysis, August natural gas futures’ central pivot point stands at $2.706. In case the contract penetrates the first resistance level at $2.735 per million British thermal units, it will encounter next resistance at $2.786. If breached, upside movement may attempt to advance to $2.815 per mBtu.

If the energy source drops below its S1 level at $2.655 per mBtu, it will next see support at $2.626. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.575 per mBtu.

In weekly terms, the central pivot point is at $2.814. The three key resistance levels are as follows: R1 – $2.893, R2 – $2.964, R3 – $3.043. The three key support levels are: S1 – $2.743, S2 – $2.664, S3 – $2.593.