Natural gas swung between gains and losses as previous projections for a cold spell to hit large parts of the US in the third week of October gave way to more moderate weather forecasts, scaling down expectations for rising heating demand and paving the way for larger inventory builds. Market players anticipated another triple-digit inventory build.
On the New York Mercantile Exchange, natural gas futures for November settlement rose by 0.18% by 12:58 GMT to $3.905 per million British thermal units after trading on the red for most of the day. Prices ranged between $3.919 and $3.866, the lowest since September 24th. The power-station fuel slid 3.5% on Monday, the most since September 2nd, to close at $3.898 per mBtu.
Bearish sentiment continued to dominate the market as short-term weather forecasts called for mostly seasonal or little-below-average temperatures across the central US and Northeast, which were previously expected to experience much colder temperatures that would induce heating demand. At the same time, weather data for later in the month, albeit being messy, no longer supported speculations for freezing temperatures across some high-consuming areas, allowing for higher inventory builds.
According to NatGasWeather.com, cooler air will push into the central US and Northeast today and on Friday, coupled with showers and thunderstorms. However, the cold blasts will not be strong enough to bring freezing temperatures, thus limiting heating demand. At the same time, the southern and western portions of the country will remain very warm with highs reaching the upper 80s and lower 90s, driving moderate cooling demand.
During the third week of October a very active pattern will bring a large number of weather systems carrying showers, thunderstorms and below-normal temperatures across most of the US, but no drastic drop in temperatures is expected to occur. The pattern could play out in different ways but, generally, readings across the north-central US and Northeast are projected to be only slightly cooler than usual, while the southern and western regions will enjoy slightly warmer-than-usual weather.
“If there was follow through toward colder patterns for the third week of October, we believe weather sentiment would have become moderately bullish,” NatGasWeather.com analysts wrote in a note on Tuesday. “The weather data is now all over the place in a messy pattern where numerous weather systems will track across the US with showers and cooler temperatures, yet none will be able to tap cold enough northern Canadian air to drop temperatures into the 20s.”
Temperatures
According to AccuWeather.com, temperatures in New York will range between 65 and 52 degrees Fahrenheit, matching the seasonal. Lows will rise to 64 degrees on October 14th, 14 above usual, before easing back to 54-55 degrees on October 19th-20th. Chicago will see readings falling to the seasonal 48 degrees on Thursday, before sliding further to as much as 31-34 degrees between October 19th-22nd, 13 beneath the normal. A follow-up warming will push lows up to 46 degrees two days later, compared to the average of 43.
As for the warmer parts of the country, Texas City will see readings peaking at 87 degrees throughout the week, 5 above usual. A following brief cooling will cause a drop to 68-69 degrees between October 20th-22nd, before they jump back to the upper 70s and lower 80s through the end of the month.
On the West Coast, Sacramento will enjoy a mostly sunny week, with highs ranging between 85 and 93 degrees through October 13th, compared to the average of 80. Readings will then moderate to 72-78 degrees between October 14th-October 16th, before surging back to above-average levels at 86-88 degrees in the following five days.
US inventories
The power-station fuel plunged last Thursday after the Energy Information Administration reported that US natural gas storage expanded by 112 billion cubic feet in the week ended September 26th, exceeding a projected gain in the range of 105-109 billion cubic feet. The build was the twenty-fourth straight bigger-than-average injection, and narrowed the deficit to the five-year average to 11.4%, down from 55% in March.
The recent comfortable readings are projected to lead to another quite larger than the average build due to be reported this Thursday. According to analysts’ preliminary estimates, the government agency will likely report a build of 105 billion cubic feet in the week ended October 3rd, exceeding last year’s 91-bcf injection during the comparable week and the five-year average increase of 84 billion cubic feet.
Pivots
According to Binary Tribune’s daily analysis for Monday, November natural gas futures’ central pivot point stands at $3.9283. In case the contract penetrates the first resistance level at $3.9697 per million British thermal units, it will encounter next resistance at $4.0413. If breached, upside movement will probably attempt to advance to $4.0827 per mBtu.
If the energy source drops below its first support level at $3.8567 per mBtu, it will next see support at $3.8153. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.7437 per mBtu.
In weekly terms, the central pivot point is at $4.044. The three key resistance levels are as follows: R1 – $4.179, R2 – $4.320, R3 – $4.455. The three key support levels are: S1 – $3.903, S2 – $3.768, S3 – $3.627.
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