Natural gas trading outlook: futures rise on expected warm-up

Natural gas rose in early European trading on Monday as an anticipated warm-up across the eastern US will spur higher natural gas demand compared to last week, but weather sentiment will likely remain skewed to the bearish side.

Natural gas for delivery in October traded 0.93% higher at $2.718 per million British thermal units at 08:37 GMT, shifting in a daily range of $2.725 – $2.695. The contract rose 0.4% on Friday to $2.693, settling the week 1.4% higher in part due to a bullish inventory report released a day earlier.

According to NatGasWeather.com, natural gas demand in the US will be low-moderate this week, compared to normal, as a strong cool blast with showers and thunderstorms covers much of the eastern US, including the Southeast. This will keep afternoon highs in the upper 60s to 70s north and in the lower 80s south. However, warm high pressure will rebound over the East as the week progresses, gradually lifting temperatures, but not enough to spur very strong cooling demand. Texas and the Plains will see readings get fairly hot, with highs in the 90s, but the West will cool as Pacific weather systems track inland, significantly dropping cooling demand compared to last week.

Next week will bring very warm conditions over almost the entire US, with warmer-than-usual weather expected over the southern, central and eastern US, but temperatures will likely still not be high enough to significantly affect inventory builds. Meanwhile, cool Canadian weather systems will track through the Northwest and northern Plains, bringing showers and cooler-than-usual temperatures.

Readings

According to AccuWeather.com, temperatures in New York will peak at 78 degrees Fahrenheit on September 15th, 2 above usual, before jumping into the mid 80s for five days, followed by a return to the mid-upper 70s. Chicago will max out at 81-83 degrees on September 16-17th, compared to the average 75, before dropping back into the low-mid 70s.

Down South, readings in Houston will peak in the upper 80s and lower 90s through September 24th, followed by a cooling to the lower 80s. On the West Coast, temperatures in Los Angeles will max out at 78 degrees tomorrow, 5 below usual, before jumping to 85 degrees three days later and remaining warmer than usual through September 27th.

Inventories

Last Thursdays inventory report by the EIA showed a smaller than expected build of 68 bcf for the week ended September 4th, 7 bcf below expectations, which brought the total gas held in US storage hubs to 3.261 trillion cubic feet. Still, the above-normal inventory gain helped expand a surplus over the five-year average stockpiles of 3.134 trillion to 4.1% from 4.0% a week earlier.

This Thursdays report will likely print another near-average build, with early estimates pinning the number at about 74 bcf, compared to the five-year average gain of 75 bcf during the seven days ended September 11th, while stockpiles rose by 90 bcf a year earlier.

Next weeks inventory increase, however, is expected to exceed the average for the period as the current cool weather across the eastern US is taken into account. The September 24th report is expected to print a stockpiles gain of little over 100 bcf for the week ended September 18th, compared to the average gain of 83 bcf and the year-ago one of 96 bcf.

Pivot points

According to Binary Tribune’s daily analysis, October natural gas futures’ central pivot point stands at $2.690. In case the contract penetrates the first resistance level at $2.720 per million British thermal units, it will encounter next resistance at $2.747. If breached, upside movement may attempt to advance to $2.777 per mBtu.

If the energy source drops below its S1 level at $2.663 per mBtu, it will next see support at $2.633. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.606 per mBtu.

In weekly terms, the central pivot point is at $2.689. The three key resistance levels are as follows: R1 – $2.737, R2 – $2.781, R3 – $2.829. The three key support levels are: S1 – $2.645, S2 – $2.597, S3 – $2.553.