Natural gas trading outlook: futures steady as US braced for cold

Natural gas futures were steady during early trade in Europe today, after a sizable increase last week, as investors look to a cold spell over the US, forecast to begin later this week, to strengthen bulls.

Front-month natural gas futures for settlement in November on the New York Mercantile Exchange traded at $4.024 per million British thermal units (mBtu) at 9:35 GMT, down 0.12% for the day. Prices ranged from $4.011 to $4.048 per mBtu. The contract added ~3.2% last week.

The blue fuel clocked a significant gain last week, as investors looked past a sizable injection to natgas inventories in the US, and towards an ominous Canadian weather system, due to reach the US later this week.

The system could potentially drive temperatures highs to as low as 50, while overnight lows drop well below freezing. Though not exceptionally cold, the system boasts enough strength to scare the markets into an early heating hype, as investors are still more sensitive to cold forecasts, after the brutally cold winter last year.

“Important to the markets is what happens late next week when a colder Canadian weather system tracks across the northern Rockies and towards the Midwest,” analysts at NatGasWeather.com wrote in a note to clients on Friday. “This is not an exceptionally cold system, but with supplies still well below normal, added hype and fear could support the markets, especially if additional cool blasts look to follow.”

Short-term, however, patterns see a very mild and comfortable outlook, with little of either cooling or heating demand, set to bulk up next weeks reported inventory build.

US weather outlook

New York is having a pretty warm Monday, according to AccuWeather.com, with temperatures at 63-80 degrees Fahrenheit, several above average. Readings will drop tomorrow, for a seasonal, though slightly warmer remainder of the week. Chicago will also see above-par temps today, with highs in the mid 70s and mostly sunny weather. The high tomorrow will slump more than 15 degrees tomorrow, to stand about 10 below the average. Temps will climb back to normal by Wednesday, though the weekend will also be quite cold.

Down South, Houston is having a sunny, normal, rather boring week, with temps at mid 70s-upper 80s, slightly above average. Friday and the weekend, however, will see several degrees of cooling. Over on the West Coast, Los Angeles sets off the week with a normal 63-80 Fahrenheit Monday. Temps will slowly rise throughout the week and the highs for the weekend are forecast in the low 90s, 10 above usual.

Technical support and resistance levels

According to Binary Tribune’s daily analysis, November natural gas futures’ central pivot point stands at $4.013. In case the contract penetrates the first resistance level at $4.056 per million British thermal units, it will encounter next resistance at $4.084. If breached, upside movement will probably attempt to advance to $4.127 per mBtu.

If the energy source drops below its first support level at $3.985 per mBtu, it will next see support at $3.942. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.914 per mBtu.

In weekly terms, the central pivot point is at $3.971. The three key resistance levels are as follows: R1 – $4.098, R2 – $4.166, R3 – $4.293. The three key support levels are: S1 – $3.903, S2 – $3.776, S3 – $3.708.

Do you think the heating hype is oversold?

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