Natural gas trading outlook: futures headed for weekly loss as US inventories add

Natural gas futures were slightly higher during early trade in Europe today. The blue fuel gained yesterday, as the US posted weekly storage data, revealing a lower-than-expected injection. The build was still quite larger than average, though, and the next several builds will probably also be quite big.

Front month natural gas futures, due in August, traded at $3.855 per million British thermal units (mBtu) in New York at 8:39 GMT today, up 0.21%. Prices ranged from $3.837 to $3.860 per mBtu. The contract added 2.26% yesterday, though it reached an eight-month low of $3.744. As of Thursday the future was down some 2.5% for the week.

“There’s not a lot of fundamental support for prices,” Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York, said for Bloomberg. “We are in the peak cooling season and we have the emergence of fall-like weather.”

The EIA posted natural gas storage data yesterday, revealing an injection of 90 billion cubic feet (Bcf) for nat gas inventories in the week ended July 18. The build was not as big as some analysts expected, though it still was 34 Bcf larger than the 5-year average. Stocks were 20.2% below last year’s reading for the week.

Natural gas-market analysts at NatGasWeather.com, who predicted a build of 90-94 Bcf, say the following few weeks will also see massively larger-than-average inputs, at a time when cooling demand is supposed to be peaking. The analysts add, however, that prices are extremely oversold and are due for a rally at any time.

US weather outlook

NatGasWeather.com reported on Friday that the second, and more impressive, in a series of cool blasts from Canada will be over the northern US by the weekend, lowering temps and bringing clouds and some rain to the region. Temperatures will be comfortable over much of the Northeast and Midwest, allowing for air conditioning to be turned off during what is usually peak cooling season. The southern and western US will remain within an area of high pressure, keeping readings relatively high, apart from the extreme Northwest, which will be briefly subject to a cooler system. Cooling demand over the next seven days will be low.

In the 8-14 day outlook, NatGasWeather.com projects a neutral trend for the US, with the Midwest and Northeast experiencing several degrees of cooling, with the cool blasts entering from Canada, and reaching as far as the Southeast. Later in the period, a brief high pressure build up over the northern US will allow for slightly higher temps, but only briefly and not by much. The western and southern states will see little weather excitement, with high pressure dominating the outlook, keeping temps high.

New York is set for a sunny and warm day, with seasonal temps, ranging 67-82 degrees Fahrenheit, according to AccuWeather.com. Readings will slightly climb over the next few days, for a sunny and hot weekend. Next week will start off normal, before a sizable cooling later on, with plenty rains and clouds, as the second Canadian blast tracks by. Chicago will again be cloudy and cooler than normal today, with several thunderstorms forecast. Temperatures will range 68-76, a few below average. The weekend will also be cloudy, tough slightly warmer, before a sunny and cool next week.

In the South, Houston will see seasonal temps today, between 76 and 94 degrees. A thunderstorm is projected for the area in the afternoon. The weekend will be sunny and normally warm, while the start of next week will see temps climb, before a cooling later on. Over on the West Coast, Los Angeles will be sunny and seasonally warm through to next week, with little variation from average temps, ranging mostly upper 60s to mid 80s.

Technical view

According to Binary Tribune’s daily analysis, in case natural gas for settlement in August penetrates the first resistance level at $3.802 per million British thermal units, it will encounter next resistance at $3.842. If breached, upside movement will probably attempt to advance to $3.867 per mBtu.

If the energy source drops below its first resistance level at $3.737 per mBtu, it will see support at $3.712. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.672 per mBtu.