Natural gas trading outlook: futures headed for sizable weekly loss as US stockpiles gain and weather forecasts soften

Natural gas futures were higher during early trade in Europe today, after a significant drop yesterday, as the US Energy Information Administration (EIA) logged a bigger-than-expected injection for blue fuel inventories.

Front month natural gas futures, due in July, added 0.41% at the New York Mercantile Exchange to trade for $4.603 per million British thermal units at 8:51 GMT today. Prices ranged from $4.558 to $4.604 per mBtu. The contract dropped 1.61% yesterday, and so far this week the blue fuel has lost more than 3%.

The Energy Information Administration’s (EIA) reported on natural gas stockpiles for the week through June 13 yesterday. The log revealed a gain of 113 Billion cubic feet (Bcf) for inventories, while analysts at NatGasWeather.com had suggested a 105-110 Bcf injection. The 5-year average gain for the week is 85 Bcf.

Inventories levels remain 29.1% below last year’s readings for the same week, and although the deficit has been constantly shrinking, the US is entering summer air-cooling season, when injections will probably be smaller. The above-normal temperatures over the US recently will probably dent gains in the following report next week, which will cover the seven days ending today.

Other analysts suggest inventories gains will probably remain high for the weeks to follow, as updated weather patterns project slightly cooler weather.

“We had to dial back on our power expectations,” Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York, said for Bloomberg. “The market expectation was that the next several releases would begin to show a slower build in inventories. That certainly was countermanded by the weather update.”

Power demand usually spikes during summer, as air conditioners are put to work, and power stations account for 30% of US natural gas consumption. Usually there is a direct correlation between rising summer temperatures and natural gas prices.

US weather report

NatGasWeather.com reported that Friday, like most days this week, will be quite hot for most of the central and eastern US, as well as the South. Overall cooling demand will be moderate-to-high over the next seven days, with an upward trend. A cool weather system tracks out of the Rockies and will push into the Midwest and Northeast over the weekend, bringing some cool weather. Another cooler system will push into the central US from Canada halfway through next week, probably bringing temperatures down a few degrees. The western US will see mostly seasonal weather, with rising temps over the weekend.

In the 8-14 day outlook, NatGasWeather.com projects a warmer trend, with areas in the Northeast and Midwest somewhat cooler and rainy, while the South will be quite hot, bumping up air cooling. Readings will probably be climbing everywhere in early July.

New York will be slightly quite sunny today, according to AccuWeather.com. Readings will be normal for the season, ranging 64-80 degrees Fahrenheit. The weather will probably remain sunny and warm over the weekend, with only slightly lower temps on Saturday. Boston temperatures will be just below usual today, between 60 and 75, with mostly sunny weather. Temperatures will remain relatively unchanged over the sunny weekend.

Chicago is set for quite rainy and cloudy few days, with many thunderstorms, some heavy. Readings will be average today, ranging 60-80 degrees. The weekend will also be stormy and temperatures will be a few degrees below average. Down South, Houston will be sunny and warm today and during the weekend, with readings ranging mid 70s to lower 90s.

Over on the West Coast, Los Angeles will see sunny weather today and over the weekend, with temps ranging lower 60s to around 80. Seattle weather will be cooler than usual today, with readings between 48 and 65 Fahrenheit, several below average. Temperatures will start climbing tomorrow, to be several above usual on Sunday.

Technical view

According to Binary Tribune’s daily analysis , in case natural gas for settlement in July penetrates the first resistance level at $4.670 per million British thermal units, it will encounter next resistance at $4.755. If breached, upside movement will probably attempt to advance to $4.811 per mBtu.

If the energy source drops below its first resistance level at $4.529 per mBtu, it will see support at $4.473. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $4.388 per mBtu.