Natural gas trading outlook: futures hover near five-week lows on mild weather, supply data eyed

Natural gas traded near the lowest in five weeks as weather forecasting agencies predicted no widespread freezes in the US through the end of October, curbing heating demand and allowing inventories to continue replenishing. Market players awaited the release of EIAs supply data, due at 14:30 GMT.

November natural gas traded at $3.818 per million British thermal units at 11:38 GMT, up 0.47% on the day, having shifted in a daily range of $3.834-$3.798. The power-station fuel fell for a second day on Wednesday and settled 0.42% lower at $3.800, the lowest close since September 5th.

According to NatGasWeather.com, natural gas demand over the next seven days will be moderate compared to normal. A weather system will trek today across the eastern parts of the country, carrying showers, thunderstorms and below-average temperatures. Additional reinforcing cool blasts will push overnight lows into the 40s and 30s on Friday and during the weekend, with localized freezes, inducing modest heating demand.

However, those weather systems will not be significant enough to bring widespread and consistent freezing temperatures, leaving the markets supported, but also unable to advance much.

The far southern US and Plains will remain warmer than usual throughout the week with highs in the upper 80s, stoking late season cooling demand for the energy source.

Next week, numerous weather systems with showers, thunderstorms and slightly lower-than-usual temperatures will track across the Midwest and Northeast, and will also push deep into the Southeast. The southern US will continue to gradually cool, with the until-recently widespread highs in the 80s and 90s becoming rarer, easing the need for cooling.

Both the southern and western parts of the country will remain near or little above average, shifting the focus away from the light cooling demand in the South to heating in the North, where widespread freezes are expected to become present in November. Colder weather might be expected over the northern US at the end of October and early November, NatGasWeather.com said, but patterns are not clear enough yet.

Temperatures

According to AccuWeather.com, the high in New York on October 19th will be 56 degrees Fahrenheit, 7 below usual, before rising into the above-seasonal mid-60s a week later. The low in Detroit on Saturday will be 33 degrees, 10 beneath normal, followed by a warm-up to 44 degrees on October 23rd, 3 above normal, and a further rise to 50 degrees two days later.

Down South, Texas City will reach 80 degrees on October 19th, compared to the average of 80, followed by a cooling to 71-73 degrees between October 24th-27th. On the West Coast, Sacramento will see readings peaking at 80 degrees on Sunday, 4 above usual, followed by a drop to 74-75 degrees over the next three days. Temperatures are expected to fall considerably between October 26th and October 30th, with highs ranging between 62-68 degrees, before jumping back to seasonal levels in early-November.

Supplies

Prices plunged last Thursday when the Energy Information Administration reported that US natural gas inventories rose by 105 billion cubic feet (bcf) in the week ended October 3rd, largely in line with analysts’ expectations for a jump by 105-110 bcf. This was the 25th straight weekly above-average build.

This week’s supply data is projected to show a build of around 90 billion cubic feet, compared to the five-year average of 78 billion. If confirmed, this would be the closest net injection to the average since April. A build largely exceeding the consensus injection, as in 93-94 bcf or more, would be considered strongly bearish, while a reading of 86 bcf and below – the opposite.

Gas stockpiles were less than 11% below the five-year average in the week ended October 3rd, but this still was the biggest gap for this time of the year since 2005. The EIA said in its Short-Term Energy Outlook dated October 7th that inventories may rise to 3.532 trillion cubic feet by the end of the month, the lowest for this time of the year in six years.

Daily pivot points

According to Binary Tribune’s daily analysis, November natural gas futures’ central pivot point stands at $3.807. In case the contract penetrates the first resistance level at $3.850 per million British thermal units, it will encounter next resistance at $3.900. If breached, upside movement may attempt to advance to $3.943 per mBtu.

If the energy source drops below its first support level at $3.757 per mBtu, it will next see support at $3.714. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.664 per mBtu.