Natural gas futures extend drop on warm weather outlook

Natural gas fell on Monday, extending last weeks declines, as weather forecasts saw no significant changes over the weekend, calling for warm conditions over the majority of the US through the end of September.

Natural gas for delivery in November traded 0.93% lower at $2.651 per million British thermal units at 08:21 GMT, holding in a daily range of $2.658 – $2.645. The contract slid 1.9% on Friday to $2.676, closing the week 3.3% lower.

According to NatGasWeather.com, natural gas demand in the US will be low compared to normal through September 26th, with a warm trend for the southern, central and eastern US over the following seven days, while only the Northwest will be cooler than normal.

A cool blast over the eastern US early this week will bring seasonal highs in the upper 60s to 70s. However, as the week progresses, high pressure over the central and southern US will expand to cover most of the country, warming temperatures across the North into the 70s to lower 80s, while Texas, the Southwest and parts of the South and Plains will be the hottest regions with highs of mid-80s to 90s. The West will start the week quite warm, with only the Northwest being an exception, although Pacific weather systems will push a bit deeper into the interior by the middle of the week.

Weather patterns continue to look quite bearish, according to NatGasWeather.com, as warm conditions across the North keep heating demand at bay while the lack of widespread heat limits the need for cooling, lining up a series of hefty inventory builds. Next week, the central, southern and eastern US will warm up to several degrees above normal, while cooler Canadian weather systems will sweep through the Northwest and northern Plains with showers.

The Energy Information Administration 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 and near the five-year average build for the week of 75 bcf. This brought the total gas held in US storage hubs to 3.334 trillion cubic feet, slightly narrowing a surplus over the five-year average of 3.209 trillion to 3.9% from 4.1% a week earlier.

However, very comfortable weather across the US last week will lead to a triple-digit inventory number this Thursday, with initial estimates pointing to a stockpiles gain of about 105 bcf for the seven days ended September 18th, compared to the average gain of 83 bcf and the year-ago one of 96 bcf.

Moreover, pleasant conditions across most of the country this week will bring another larger build to follow, although a bit lighter and near the average. 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, compared to the five-year average gain of 94 bcf and below the year-ago increase of 110 bcf.

Temperatures

According to AccuWeather.com, highs in New York will be in the low-mid 70s through the end of September, compared to the usual 70-73, while Chicago will see temperatures peak at 75-77 degrees on September 22-25th, above the average 72-73.

Down South, temperatures in Texas city will be peaking at 86-91 degrees through September 28th, slightly above the usual 85-86 for the period, followed by a gradual drop into the low 80s. On the West Coast, readings in Los Angeles will max out at 91 degrees on September 25th, 9 above normal, before easing to the low-mid 80s for the remainder of the month.

Pivot points

According to Binary Tribune’s daily analysis, November natural gas futures’ central pivot point stands at $2.698. In case the contract penetrates the first resistance level at $2.722 per million British thermal units, it will encounter next resistance at $2.768. If breached, upside movement may attempt to advance to $2.792 per mBtu.

If the energy source drops below its S1 level at $2.652 per mBtu, it will next see support at $2.628. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.582 per mBtu.