Natural gas trading outlook: futures orbit $4 ahead of EIA report

Natural gas futures pared earlier gains during morning trade in Europe today, ahead of US storage build figures due later today. The blue fuel had rallied some 4% this week, as traders kept eyes on varied and at places extreme US weather.

Front-month natural gas futures for settlement in October on the New York Mercantile Exchange traded at $3.989 per million British thermal units (mBtu) at 8:45 GMT, down 0.60% for the day. Prices ranged from $3.987 to $4.009 per mBtu. The contract had added ~4% over the past three sessions, reaching a two-week high of $4.040 yesterday.

Natural gas futures found support from early heating hype and an incident at a gas pipe, which left flows to Henry Hub slightly affected. The pipe is still being repaired, while the natgas flow has been redirected to keep hubs well supplied.

Investors now eye the upcoming Energy Information Administration (EIA) weekly report on US natural gas storage build. Analysts expect the injection to be between 90-98 billion cubic feet, which would also be the 22nd straight week of above-average builds. The deficit to the 5-year average total gas in storage for the comparable week was brought to just 14.2% last week from more than 50% in March, on the back of a milder summer and booming production.

Despite the significantly bearish figures and relatively mild weather, futures refuse to let go of gains and remain stuck in range, as cold overnight lows light induced heating in places, setting off an early winter hype.

“There’s a lot of hype for another brutally cold winter over the eastern US,” NatGasWeather.com analysts wrote in a note to clients yesterday. “But if winter fails to deliver, we will be swimming in nat gas sooner than later.”

US weather outlook

A mild cool blast continues tracking through the Great Lakes and into the US Midwest and Northeast, keeping temperatures comfortable, killing much of any cooling demand and probably inducing some very light heating in the next few days. Meanwhile, the South will be warming as high pressure builds, which will eventually break into the North, heating the Midwest and Northeast later next week. The West Coast is experiencing a very hot few days ahead of moderate temps coming back by the weekend. Overall cooling demand across the US will be moderate-to-low for the next few days, with insignificant heating.

New York is having a sunny and pleasant Thursday, according to AccuWeather.com, with temperatures ranging the seasonal 55-76 degrees Fahrenheit. Friday will see a several-degree drop for temps, before readings climb again to near-normal for the weekend. Chicago remains quite cool, with temperatures some 10 below averages, between 54 and 65 degrees. Readings will add a few tomorrow, and several more on Saturday, before cooling to just a few below average by Sunday.

Down South, Houston is set for storms and heavy rains today, though temps will be largely seasonal at 72-83. Thunderstorms will make appearances often through to next week, as temps remain normal and no higher than 88. Over on the West Coast, Los Angeles will see normal temperatures today, ranging from 67 to 86 degrees, after the scorching heat of the past few days. Temps will drop a further few degrees tomorrow for a nice and pleasant weekend.

“By this weekend, much of the country will be experiencing temperatures in the mid-70s to mid-80s and very comfortable overnight lows,” NatGasWeather.com analysts wrote.