Natural gas futures weekly recap – May 26 – May 30

Natural gas marked a minor daily retreat on Friday, but settled the week 4% higher as weather forecasting agencies predicted above seasonal temperatures across most of the US, as well as severe thunderstorms in some areas. Meanwhile, investors remained bullish in the long term as inventory injections hardly exceed expectations, while storage levels remain well below the average.

On the New York Mercantile Exchange, natural gas futures for settlement in July fell by 0.37% to $4.542 per million British thermal units on Friday. Prices shifted between days high and low of $4.592 and $4.489 per mBtu respectively. The energy source surged to a three-week high of $4.665 on Thursday but ended the day 1.2% lower, trimming the contracts weekly advance to 4.2%.

The southern parts of the US will see scattered storms with possible localized flooding and highs around 80 degrees Fahrenheit during the weekend. The Midwest also expects a stormy weekend with showers and thunderstorms and temperatures peaking at little over 80 degrees. There is also a tornado threat flagged from central South Dakota into central Nebraska. The East and Northeast will enjoy dry weather, with highs at around the 70s for the Northeast, but temperatures are expected to jump next week. The western US will see mostly dry weather with readings peaking in the 80s from southern Idaho down through the Great Basin, while the immediate West Coast will see lower temperatures – around the lower 70s.

According to AccuWeather.com, temperatures in New York on Sunday will peak at 75 degrees Fahrenheit, matching the average, before surging to 84 degrees on Wednesday, 8 above usual. Chicago will see above-normal readings tomorrow with a high of 83 degrees, 7 above seasonal, but conditions are expected to cool off next week, with highs dropping 6-7 degrees below the average. Meanwhile, Boston will see highs of 73 degrees on Sunday, compared to the average of 71, before soaring to 80 degrees on Wednesday, 8 above the usual. Los Angeles will enjoy sunny weather throughout the week, with Sundays highs of around 77 degrees overall persisting through the next days before accelerating to 80 degrees on June 7th.

Storage data

On Thursday, the US Energy Information Administration (EIA) revealed that natural gas supplies in the country had gained 114 billion cubic feet for the week ended May 23, exceeding expectations of a 110 bcf increase. The injection is the biggest weekly growth since June 2009, and is 21 bcf above the average gain for the week.

Stocks, however, remained 40% below the 5-year average for the week, and need to recover more than 2.5 trillion cubic feet until November, when heating demand spikes natural gas consumption. In order to fully replenish the drained stockpiles, weekly injections would need to average 90 bcf through October, 20 billion above the average gains.

Tom Saal, senior vice president of energy trading at FCStone Latin America LLC, said, cited by Bloomberg, that next weeks EIA report may show a 119 bcf jump in US gas inventories, above the five-year average of 93 billion cubic feet.

In the meantime, the hot summer months ahead should bump up natgas-fueled power demand, as air conditioners are put to work. The EIA, however, expects sustained high yields and gains for stockpiles, through booming shale gas extraction.

Technical view

According to Binary Tribune’s daily analysis for Monday, in case natural gas for settlement in July penetrates the first resistance level at $4.593 per million British thermal units, it will encounter next resistance at $4.644. If breached, upside movement will probably attempt to advance to $4.696 per mBtu.

If the energy source drops below its first resistance level at $4.490 per mBtu, it will see support at $4.438. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $4.387 per mBtu.