Natural gas trading outlook: futures extend weekly loss amid mild weather

Natural gas fell for a fourth day after the EIA reported a larger-than-expected build in US natural gas inventories and as weather forecasting agencies predicted mostly mild weather in the US throughout October.

On the New York Mercantile Exchange, natural gas for delivery in November fell by 0.50% to $3.777 per million British thermal units by 11:34 GMT. Prices held in a daily range of $3.817-$3.767. The power-station fuel fell by 0.11% to $3.796 per mBtu on Thursday, its third straight daily decline.

The Energy Information Administration reported on Thursday that US natural gas inventories rose by 94 billion cubic feet (bcf) in the seven days through October 10th, exceeding analysts’ projections for a build in the range of 89-92 bcf and the five-year average gain of 78 billion.

Total gas held in US storage stood at 3.299 trillion cubic feet, narrowing the deficit to the five-year average to 9.9%, down from 10.5% a week earlier, and also shrinking the gap to last year’s 3.643 trillion to 9.4%, from 10.1% during the preceding week.

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.

US weather

According to NatGasWeather.com, natural gas demand over the next seven days will drop to low-moderate compared to normal, from the recent moderate levels. The US will experience mostly pleasant weather before additional reinforcing cool blasts during the weekend and early next week push overnight lows into the 40s and 30s, 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 most of next week with highs in the lower 80s, stoking late season cooling demand for the energy source.

Early next week, numerous weather systems with showers, thunderstorms and slightly lower-than-usual temperatures will track across the Midwest and Northeast, lowering temperatures to 5-10 degrees below usual, 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. Most of the western parts of the US will enjoy seasonal, or slightly warmer weather.

Market players attention now turned toward possible weather systems with increased chance of lowering temperatures significantly across the North around end-October, but it is too early to get a clear grasp on them.

“It will take past October 28th before the threat of any truly cold northern Canadian air approaches the northern US,” NatGasWeather.com analysts said in a note to clients. “However, we continue to see signs of colder temperatures potentially arriving near or after the 1st of November, but it’s still not very convincing and could take days before it becomes so.”

Temperatures

According to AccuWeather.com, the high in New York on October 19th will be 54 degrees Fahrenheit, 9 below usual, before rising into the above-seasonal mid- and upper-60s after October 24th. Temperatures in Chicago will range between 53 and 49 degrees on Sunday, compared to the average of 62-45, and highs are expected to jump to the above-seasonal mid- and upper-60s after October 25th, compared to the seasonal 58-59.

Down South, Houston will reach 82 degrees on October 19th, compared to the average of 80, followed by a cooling to 76-74 degrees between October 23rd-27th. On the West Coast, Los Angeles will see readings peak at the seasonal 78 degrees on Sunday, followed by a warm-up to 85-87 degrees between October 22nd and October 25th.

Pivot points

According to Binary Tribune’s daily analysis, November natural gas futures’ central pivot point stands at $3.793. In case the contract penetrates the first resistance level at $3.837 per million British thermal units, it will encounter next resistance at $3.879. If breached, upside movement may attempt to advance to $3.923 per mBtu.

If the energy source drops below its first support level at $3.751 per mBtu, it will next see support at $3.707. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.665 per mBtu.