Natural gas trading outlook: futures steady on mixed weather

Natural gas was little changed in early European trading on Tuesday as market players weighed very warm weather across almost the entire US this week against an expected cooling to follow.

Natural gas for delivery in October traded 0.26% lower at $2.682 per million British thermal units at 08:04 GMT, shifting in a daily range of $2.694 – $2.679. The contract slid 1% on Monday to $2.689 per mBtu after it rose 0.7% last week.

Natural gas demand in the US will be higher this week compared to last, overall moderate compared to normal, but locally high in some regions. High pressure will grip almost the entire US through the weekend, apart from the West, after cooler conditions east of the Rockies curbed cooling demand last week. However, weak weather systems will prevent the eastern ridge from becoming too hot, NatGasWeather.com said, keeping highs over the Midwest, Mid-Atlantic and Northeast in the mid-upper 80s.

Texas and the southern Plains will be a bit hotter as temperatures max out in the low-mid 90s, while tropical storm Erika fizzled into a weak circulation over the weekend and will play out to the bearish side, bringing cooler readings and rains to Florida and the Southeast. Meanwhile, the western US will cool this week as unseasonably strong Pacific systems track inland, including California.

Next week will start with high pressure continuing to dominate much of the southern, central and eastern US, while the West will remain cooler, according to NatGasWeather.com. However, localized weather systems will bring showers and cooling, keeping highs checked, and as the week progresses, the north-eastern US will gradually trend cooler as the summer draws to an end and seasonal cool blasts attempt to push into the country. The eastern ridge of hot pressure will try to rebuff the arriving cool air but it will fail to do so for long and cooling demand is expected to drop significantly late next week.

This will line up a series of large inventory builds after the next two come above the average as well. This Thursday’s report will bring a hefty gain in stockpiles as last week’s cooler weather across the north-eastern US is factored in. Early estimates pin the build at about 90 bcf, well above the five-year average inventory gain for the week ended August 28th of 60 bcf and a 79-bcf increase a year earlier.

This week’s warm-up will lead to a narrower inventory gain for the September 10th report, but the mentioned localized cooler weather systems will keep cooling demand checked, resulting in another larger-than-average build. Initial estimates point to a stockpiles increase of about 80 bcf for the week ended September 4th, 17 bcf above the average, while supplies grew by 90 bcf during the comparable period a year earlier.

Temperatures

According to AccuWeather.com, highs in New York will peak at 92-94 degrees Fahrenheit through September 4th, compared to the average 79-80, followed by a drop to the mid 80s over the next six days and a further slide to the low 80s and upper 70s afterwards. Chicago will max out at 85-88 degrees this week, above the usual 79-80, before afternoon highs drop into the low-mid 70s as of September 9th.

Down South, temperatures in Houston will fail to exceed 90-93 degrees through September 7th, slightly above the average 90-91, followed by a slight cooling. To the West, Sacramento will max out at 79-83 degrees the next four days, below the usual 89, followed by a return to seasonal for most of the remainder of the month.

Pivot points

According to Binary Tribune’s daily analysis, October natural gas futures’ central pivot point stands at $2.675. In case the contract penetrates the first resistance level at $2.706 per million British thermal units, it will encounter next resistance at $2.724. If breached, upside movement may attempt to advance to $2.755 per mBtu.

If the energy source drops below its S1 level at $2.657 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 $2.608 per mBtu.

In weekly terms, the central pivot point is at $2.694. The three key resistance levels are as follows: R1 – $2.746, R2 – $2.778, R3 – $2.830. The three key support levels are: S1 – $2.662, S2 – $2.610, S3 – $2.578.