Natural gas trading outlook: futures steady, as US holiday mutes trade

Natural gas futures were relatively stable during early hours in Europe today. The US mark Memorial day, which is a holiday, and it severely hampered activity on the markets. Weather reports project more warm days to follow, with some cooler periods later in the week. Previously, mild weather and growing shale production made possible significant gains for US supplies recently, pressuring contracts to three consecutive weekly declines.

Front month natural gas futures, due in June, fell by 0.23% at the New York Mercantile Exchange to trade for $4.395 per million British thermal units at 9:14 GMT. Prices ranged from $4.391 to $4.406 per mBtu. Last week the blue fuel lost 0.01%, nearing a two-month low at $4.349 per mBtu.

According to AccuWeather.com New York will be very hot today, with temperatures ranging 67 to 86 degrees Fahrenheit, 10 to 12 above average. Tomorrow will also be mostly sunny, though an afternoon thunderstorm is possible, which will not impact readings very much. Wednesday will be quite cooler, with highs in the upper 60s, several degrees short of usual for this time of year. The slightly below-average temps will stay through the end of the week and into June.

Boston is also set heat today, with temperatures 10-15 degrees above average, at 60 to 84 Fahrenheit. Tomorrow will bring a sizable decline in readings, which will be largely normal. Wednesday and Thursday will be quite cooler, with temps ranging 52-65 degrees. The weather will normalize into the weekend and next week, when more heat is to be expected.

The weather over Chicago will be similar to that of the East Coast, with temperatures several degrees above normal today and tomorrow, and a sizable drop midweek. Over the weekend readings will range 55 to 73, which is on-par with the average.

On the West Coast, Los Angeles will be slightly warmer than usual through this week, with highs in the upper 70s and low 80s. The first half of next week will be hotter, with highs in the upper 80s.

US inventories

Last Thursday, the EIA released its weekly report on natural gas storage levels in the US for the week through May 16. The report showed that supplies of the blue fuel had added 106 billion cubic feet (bcf), exceeding expectations of 100-103 bcf growth. The figure records the biggest weekly gain since June 2013, and is 16 bcf above the 5-year average increase for the week.

However, stocks still need to recover more than 2.5 trillion cubic feet in order to restore pre-winter levels before November. This equals an average of more than 100 bcf gains each week till then, and as summer season sets in, such growth might be hard to achieve.

Shale gas production is peaking, but power demand will be inevitably growing, as air conditioners are put to work for the hot summer months ahead.

Technical view

According to Binary Tribune’s daily analysis, in case natural gas for settlement in June penetrates the first resistance level at $4.425 per million British thermal units, it will encounter next resistance at $4.444. If breached, upside movement will probably attempt to advance to $4.478 per mBtu.

If the energy source drops below its first resistance level at $4.372 per mBtu, it will see support at $4.338. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $4.319 per mBtu.