Natural gas futures remain pressured ahead of EIA inventory data

Natural gas extended losses on Thursday as overall market sentiment remained dominated by bearish weather forecasts ahead of a weekly EIA inventory report which is expected to show a triple-digit gain.

Natural gas for delivery in November traded 0.45% lower at $2.626 per million British thermal units at 08:06 GMT, shifting in a daily range of $2.644 – $2.623. The contract settled 1 cent lower at $2.638 per mBtu on Wednesday.

The Energy Information Administration will likely report today an inventory build of about 96 bcf for the week ended September 18th, according to analysts median estimate, while NatGasWeather.com predicts a build of about 105 bcf, reflecting very comfortable weather conditions across the majority of the US last week. This compares to the five-year average gain of 83 bcf for the period and the year-ago one of 96 bcf.

The government agency said last week that US natural gas inventories rose by 73 billion cubic feet in the seven days ended September 11th, in line with analysts’ expectations and slightly below 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.

Moreover, pleasant conditions across most of the country this week will bring another hefty build to follow, although a bit lighter and near the average. Initial estimates for the October 1st report call for a gain 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.

According to NatGasWeather.com, natural gas demand in the US will be low compared to normal through September 30th, with a warm trend in effect for the southern, central and eastern US over the following seven days, while the Northwest will be near or cooler than normal.

A very comfortable weather pattern remains in effect over most of the US. High pressure will continue to dominate much of the country this week, resulting in widespread highs several degrees above normal. Temperatures over the North will remain in the comfortable 70s and low 80s through the weekend, limiting the need for heating. Texas, the South and the Southwest will be the country’s hottest regions with highs in the 80s and 90s, but with relatively strong cooling demand confined mainly to those regions, national consumption will remain subdued. Over the West, California will again become quite warm, while cooler weather systems track into the Northwest and northern Rockies.

The bearish pattern will remain in force next week as well, with the eastern, southern and central US warming up a bit more, but the lack of hot temperatures will keep cooling demand limited. A cooler trend will remain in effect over the Northwest and northern Rockies as Canadian weather systems track through, NatGasWeather.com said.

It should be noted that the pool of cold air over Canada continues to strengthen but before it advances southward, the northern US will enjoy quite comfortable conditions. However, with early signs of a more pronounced cool Canadian blast around October 6th, natural gas demand will likely begin to pick up in the second week of October as heating consumption rises.

Temperatures

According to AccuWeather.com, readings New York will peak at 82 degrees today, 10 above normal, before dropping into the mid 70s through the rest of the month. The high in Chicago will be 73 degrees today and tomorrow, 1 above usual, and will drop to 71 degrees on September 29th.

Down South, temperatures in Texas City will max out at 86-88 degrees through October 2nd, before easing to the low 80s. On the West Coast, readings in Los Angeles will reach 90-93 degrees the next three days, compared to the average 81-82, followed by a gradual drop to the low-mid 80s.

Pivot points

According to Binary Tribune’s daily analysis, November natural gas futures’ central pivot point stands at $2.643. In case the contract penetrates the first resistance level at $2.659 per million British thermal units, it will encounter next resistance at $2.680. If breached, upside movement may attempt to advance to $2.696 per mBtu.

If the energy source drops below its S1 level at $2.622 per mBtu, it will next see support at $2.606. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.585 per mBtu.