Natural gas futures head for weekly gain on hot South, bullish inventory data

Natural gas headed for a sizable weekly gain following a bullish inventory report by the Energy Information Administration on Thursday and as the southern half of the US remained engulfed by hot temperatures.

Natural gas for delivery in September traded 0.04% higher at $2.814 per million British thermal units at 08:05 GMT, shifting in a daily range of $2.824-$2.802. The contract rebounded on Thursday following the EIA report and settled the day 0.5% higher at $2.813. The price is up 3.6% for the week so far.

The government agency said yesterday that US natural gas inventories rose by 32 billion cubic feet in the week ended July 31st, well below analysts projections for a 42 bcf gain and the five-year average build for the period of 53 bcf.

Total gas held in US storage hubs amounted to 2.912 trillion cubic feet, narrowing a surplus over the five-year average of 2.848 trillion to 2.2% from 3.0% a week earlier. Supplies were also 22.5% above the year-ago inventory level of 2.377 trillion cubic feet.

However, cooler weather across key consumption regions of the US this week will lead to an above-average inventory build for next Thursdays report. Hot high pressure continues to dominate much of the central and southern US, NatGasWeather.com said, but weather systems with showers and thunderstorms tracking across the Great Lakes, Northeast and Northwest have curb national cooling demand this week. Natural gas demand in Texas, the Plains and the southern US will be very high compared to normal through August 13th, while remaining moderate across the Great Lakes and Northeast.

As a result, the August 13th report will likely show a build in the upper 50s bcf for the week ended August 7th, exceeding the average 48 bcf, albeit not by much, while supplies rose by 79 bcf a year ago.

However, the hot dome of high pressure over Texas will begin to once again gradually expand late this weekend through next week, according to NatGasWeather.com, covering almost the entire country apart from the Northwest and Northeast. Most importantly, the ridge will try to fend off additional Canadian weather systems late next week that will attempt to push into the northeastern US, a battle the outcome of which weather models still struggle to predict. Basically, weather sentiment will be determined by the high pressure dome’s ability to keep incoming Canadian systems confined to the country’s northeastern and northwestern corners as any deeper push into the inner US will lead to lighter cooling demand on a national level.

Temperatures

According to AccuWeather.com, New York will see highs deviate only slightly around the average 83-84 degrees Fahrenheit through August 15th. Readings in Chicago will peak at 78-82 degrees over the next six days, compared to the average 82-83, followed by a short-lasting warm-up into the mid 80s to lower 90s.

Down South, highs over Texas City will remain anchored at 95-98 degrees through August 15th, above the usual 90, before dropping to the mid 80s to lower 90s for the rest of the month. On the West Coast, Los Angeles will see readings peak at 79-82 degrees through August 10th, followed by a jump to the mid-upper 80s the next four days.

Pivot points

According to Binary Tribune’s daily analysis, September natural gas futures’ central pivot point stands at $2.792. In case the contract penetrates the first resistance level at $2.859 per million British thermal units, it will encounter next resistance at $2.904. If breached, upside movement may attempt to advance to $2.971 per mBtu.

If the energy source drops below its S1 level at $2.747 per mBtu, it will next see support at $2.680. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.635 per mBtu.

In weekly terms, the central pivot point is at $2.772. The three key resistance levels are as follows: R1 – $2.839, R2 – $2.961, R3 – $3.028. The three key support levels are: S1 – $2.650, S2 – $2.583, S3 – $2.461.