Natural gas futures head for weekly drop on bearish weather conditions

Natural gas fell for a fourth day after the Energy Information Administration reported on Thursday a near-average inventory build, while overall sentiment remained dominated by bearish weather conditions.

Natural gas for delivery in October traded 0.19% lower at $2.647 per million British thermal units at 08:13 GMT, shifting in a daily range of $2.648 – $2.639. The contract slid 0.3% on Thursday to $2.652 and is currently down 1.7% for the week.

The EIA said on Thursday that US natural gas inventories rose by 73 billion cubic feet in the week ended September 11th, in line with analysts expectations. This was also near the five-year average build for the week of 75 bcf, while stockpiles rose by 90 bcf a year earlier.

Total gas held in US storage hubs amounted to 3.334 trillion cubic feet, slightly narrowing a surplus over the five-year average of 3.209 trillion from 4.1% a week earlier. Supplies were also 15.8% above the year-ago stockpiles level of 2.878 trillion cubic feet.

Next Thursdays report, however, is expected to bring a much heftier inventory build as quite comfortable conditions across the majority of the US this week curbed cooling demand. Temperatures over the eastern US will remain a few degrees above normal through today, NatGasWeather.com said. Afternoon highs will be in the upper 60s to mid-80s over the northern US, basically removing the need for cooling but also keeping heating demand at bay when it should be steadily increasing. Meanwhile, readings over the South will peak in the mid-80s to 90s, spurring only light cooling demand. A stalled frontal boundary will keep max temperatures over the Southeast within the 80s, curbing cooling demand to lighter than normal, while over the West, Pacific weather systems have brought cooler readings and showers.

This will lead to a triple-digit inventory number next Thursday, with initial estimates pointing to a stockpiles gain of about 105 bcf for the week ended September 18th, compared to the average gain of 83 bcf and the year-ago one of 96 bcf.

A fresh cool blast will hit the Midwest and interior Northeast this weekend, NatGasWeather.com said, dropping highs briefly into the 60s and 70s, before it fizzles early next week and temperatures across most of the country once again rise to several degrees above normal. As the week progresses, the central, southern and eastern US will remain dominated by high pressure, while the Northwest and northern Plains will be slightly cooler than normal due to Canadian systems passing through with showers.

This will probably lead to another triple-digit report for the following Thursday as the north-eastern US hovers near the average, slightly above or below at times, while the south-central US drives stronger cooling demand, but with no widespread heat. Initial estimates for the October 1st report call for an inventory build of about 100 billion cubic feet during the seven days ended September 25th, slightly above the five-year average gain of 94 bcf and below the year-ago increase of 110 bcf.

Temperatures

According to AccuWeather.com, readings in New York will max out at 87 degrees Fahrenheit on September 19th, 13 above usual, before gradually dropping into the low-mid 70s over the rest of the month. Chicago will see temperatures peak at 78 degrees today, 3 above normal, before highs ease to the upper 60s and low-mid 70s through the end of September.

Down South, Texas city will be peaking at 89-91 degrees through September 22nd, slightly above the usual 86-87 for the period, followed by a gradual drop into the low 80s as of September 26th. On the West Coast, temperatures in Los Angeles will max out at 90-92 degrees on September 19-20th, before easing to the low-mid 80s over the following 10 days.

Pivot points

According to Binary Tribune’s daily analysis, October natural gas futures’ central pivot point stands at $2.645. In case the contract penetrates the first resistance level at $2.686 per million British thermal units, it will encounter next resistance at $2.721. If breached, upside movement may attempt to advance to $2.762 per mBtu.

If the energy source drops below its S1 level at $2.610 per mBtu, it will next see support at $2.569. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.534 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.