Natural gas trading outlook: futures climb as US temps set to rise

Natural gas prices were higher during early trade in Europe today. The blue fuel recorded an impressive rally this week, as weather patterns call for rising temperatures over top-consumer US in the coming days.

Natural gas futures for delivery in September traded at $3.902 per million British thermal units (mBtu) at 9:54 GMT on the NYMEX, up 0.13%. Prices ranged from $3.882 to a two-week high of $3.928 per mBtu. The contract added 1.64% on Tuesday after a further 0.95% gain on Monday.

“The only weather reason prices should be supported is because Texas and California could remain quite hot,” analysts at NatGasWeather.com wrote in a note to clients today. Bearish sentiment “could increase at any time as market participants receive word cooler than normal temperatures are likely to return to the northern US.”

Natural gas prices were indeed supported by seasonal temps across the southern and southwestern states, generating moderate cooling demand. The northern states however, are still cooler than normal, allowing for considerably lower cooling demand and more sizable inventory build ups.

A Bloomberg survey projected this weeks report, which will cover the week through 1 August, will reveal ~86 billion cubic feet (Bcf) of natural gas were added to stockpiles. NatGasWeather.com suggested an injection of 80-84 Bcf, in comparison with a 49 Bcf average gain for the past five years.

US weather outlook

NatGasWeather.com reported today that the northern and western US will see showers, storms and comfortably low temperatures in the next few days, some localized drops to the 60s possible, followed by a several-degree rise for temps, as high pressure builds up towards week’s end. The southern US will remain quite hot, with highs reaching triple digits. Overall cooling demand will be low-to-moderate.

Next week will start off with high pressure and seasonal to above-seasonal temps. Around midweek, however, a cooler Canadian system is due to head south into the US, bringing rains and clouds, and lowering temps back to comfortable, allowing for more sizable natgas builds.

“Simply put; national forecasts and big market players should know cool blasts are likely going to return in mid-August,” NatGasWeather.com added. “But the weather models need to be become more convincing over the coming days to bring a return of strong bearish weather headwinds.”

New York is set for a couple of thunderstorms today, according to AccuWeather.com, though temps will remain seasonal at 66-84 degrees Fahrenheit. Through weeks end temps will drop a few degrees, with mostly sunny weather and low humidity. Chicago remains quite cooler than normal, with temperatures ranging 64-77 today, 5-6 below average. It will be sunny and pleasant this whole week, as temps will keep to several degrees below average.

Down South, Houston will see seasonal temps today, ranging 76-92 degrees, though an afternoon thunderstorm might very well offset the daily peak. Tomorrow will be quite similar to today, with seasonal temps and pm storm. Later in the week, readings will start climbing to be slightly above average for the weekend and into next week.

Technical support and resistance levels

According to Binary Tribune’s daily analysis, natgas September future’s central pivot point on the NYMEX stands at $3.879. In case the contract penetrates the first resistance level at $3.933 per million British thermal units, it will encounter next resistance at $3.968. If breached, upside movement will probably attempt to advance to $4.022 per mBtu.

If the energy source drops below its first resistance level at $3.844 per mBtu, it will see support at $3.790. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.755 per mBtu.