Natural gas trading outlook: futures rise on bullish EIA report

Natural gas futures climbed higher after the US reported the smallest weekly build for natural gas inventories in four months. Prices were already quite high, as heat over much of the US had stoked bullish sentiment over the past few days.

Front-month natural gas futures for delivery in October traded at $4.062 per million British thermal units (mBtu), up 1.47%, at 14:39 GMT on the NYMEX. Prices ranged from $3.991 to $4.062 per mBtu. The contract added 1.37% on Wednesday, reaching a six-week high of $4.032.

“Prices remain tricky short term,” analysts at NatGasWeather.com wrote in a note to clients today. “We expect the markets to have limited upside potential as the return of 100+ Bcf builds will be looming.”

Today’s Energy Information Administration (EIA) report, which covers the week through August 22, logged an injection of 75 billion cubic feet, the smallest weekly build since early May, though continuing the larger-than-average builds series for the nineteenth week. Storage levels were brought to 2 630 trillion cubic feet, just 16.5% short of the 5-year average, and are headed for a near-complete replenishment ahead of winter heating season.

Next week’s build is also expected to be leaner, as several days of warm temps over the northern US drive fairly strong cooling demand.

High temperatures in the summer generally prompt increased cooling demand, which in term bumps up overall natural gas consumption, as 30% of all US natgas is burned in power stations, generating electricity for air conditioners, among all other things.

US weather outlook

NatGasWeather.com projected easing temps over the southern and central US in the coming days, as the cool Canadian system that tracks through the Midwest and Northeast. The system will be off the mainland by next week, allowing for high pressure to again build up and bump readings up a notch. Overall cooling demand over the next seven days will be moderate.

“Cooler temperatures will sweep through the central US, including the southern Plains and northern Texas, over the coming days,” NatGasWeather.com said. “The northern US will be quite comfortable into the first few days of September.”

New York will finally breath easily today, as temps lower down to seasonal, ranging 62-82 degrees Fahrenheit, according to AccuWeather.com. Temps will further drop tomorrow, before some more heat on Sunday, when readings will again push into the high 80s. Chicago is set for another moody day, with mostly clouds and some rain, temps between 68 and 72 degrees, several below average. Starting tomorrow temperatures will climb to seasonal as more clouds, rains and occasional storms keep any heat in check.

Down South, Houston will see seasonal temps today, between 77 and 92, with mostly clouds and a thunderstorm. The weather will be largely the same through to Sunday, when the clouds will break, though temps will remain seasonal at most, with more storms due. Over on the West Coast, Los Angeles readings are projected at several above average, ranging 68-92. Temps will be slowly lowering over the next few days, though they will remain above average through to next week.

Overall, next week will set off with relatively high temps, though there will be a significant cooling across the whole US later on. Cooling demand will be moderate-to-low.