Natural gas trading outlook: futures drop on milder weather over the US, inventories data ahead

Natural gas futures traded lower before noon in Europe today. Weather reports project a normal week for top-consumer US, in terms of temperatures, with a sizable warming next week. Stockpiles in the US were reported to have increased last week, but remain almost a trillion cubic feet below last year’s figures.

Front month natural gas futures, due in June, lost 0.40% at the New York Mercantile Exchange to trade for $4.452 per million British thermal units at 9:03 GMT. Prices ranged from $4.430 to $4.484 per mBtu. Yesterday the contract added 1.29%, after on Friday it closed for a 2.50% weekly decline as heating season in top-consumer US nears an end.

According to AccuWeather.com New York will be warm and sunny today, temperatures ranging 62-78 degrees Fahrenheit, several degrees above average. Starting tomorrow and through to Sunday readings will drop several degrees to lows in the upper 50s and highs around 70. The cold weather will be accompanied by thunderstorms and showers in places. Next week will see more sunny weather and a significant warm up, bringing readings to range from low 60s to high 70s. Chicago will probably have to deal with a strong afternoon thunderstorm today, though temps will be above normal, ranging 62 – 77 Fahrenheit. Wednesday will bring sunny weather, but also a drop in readings. Over the following 3-4 days temperatures will not rise above 70, which is normal for this time of year. Next week is set for several-degrees higher readings, but also more cloudy and rainy weather. On the West Coast, Los Angeles will be slightly cooler than average today, with temperatures ranging 58 to 72 degrees. The next few days will be largely the same, before a warm up next week.

US inventories

US natural gas stockpiles added 105 billion cubic feet in the week ended May 9th, government data showed on Thursday, which was the highest injection in almost a year. Analysts had expected a build up of around 100 billion cubic feet.

Output from shale formations will lead to record increases in stockpiles through the end of October, when heating demand kicks in, Goldman Sachs Group Inc. said in a note.

“We’ve had consecutive bearish surprises in the storage numbers,” said for Bloomberg Tim Evans, energy analyst at Citi Futures in New York. “There’s a risk that we’ll continue to probe the downside in the weeks ahead.”

Technical view

According to Binary Tribune’s daily analysis, in case natural gas for settlement in June on the NYMEX penetrates the first resistance level at $4.532 per million British thermal units, it will encounter next resistance at $4.594. If breached, upside movement will probably attempt to advance to $4.665 per mBtu.

If the energy source drops below its first resistance level at $4.399 per mBtu, it will see support at $4.328. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $4.266 per mBtu.