Natural gas weekly recap, October 13 – October 17

Natural gas fell for a fourth day on Friday to mark a second straight weekly decline amid speculations that overall mild weather across most of the US will prompt additional above-average inventory injections, further narrowing a record deficit.

November natural gas futures fell by 0.79% on Friday to settle the week 2.4% lower at $3.766 per million British thermal units, the lowest close since July 28th. Prices ranged between a one-week high touched on Tuesday and Fridays trough of $3.715, the lowest since November 22nd 2013.

The power-station fuel fell to new multi-month lows and extended its weekly decline on Thursday after the Energy Information Administration reported 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. This was the 26th consecutive above-average weekly build.

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.

Due to this weeks mostly seasonal and in some regions above-normal temperatures, analysts expectations for the build due to be reported on October 23rd ranged between 95 and 98 billion cubic feet, well above the five-year average net injection of 70 billion cubic feet.

US weather

NatGasWather.com reported on Friday that 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, temperatures in New York on October 22nd will range between 56 and 53 degrees Fahrenheit, compared to the average of 62-48, before highs jump into the lower and mid 60s between October 24th-27th. Chicago will see lows drop to 43 degrees on Tuesday and Wednesday, 1 below usual, before jumping to the above-average lower 50s on Friday and during the weekend.

Down South, Houston will see readings max out at 84 degrees on Tuesday, 4 above normal, before they ease to the upper 70s between October 24th and October 29th. On the West Coast, the high in Los Angeles on October 20th will be seasonal at 78 degrees but a following warm-up will push readings to 87 degrees on Thursday and Friday.

Pivot point levels

According to Binary Tribune’s daily analysis for Monday, November natural gas futures’ central pivot point stands at $3.766. In case the contract penetrates the first resistance level at $3.817 per million British thermal units, it will encounter next resistance at $3.868. If breached, upside movement may attempt to advance to $3.919 per mBtu.

If the energy source drops below its first support level at $3.715 per mBtu, it will next see support at $3.664. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.613 per mBtu.

In weekly terms, the central pivot point is at $3.812. The three key resistance levels are as follows: R1 – $3.909, R2 – $4.052, R3 – $4.149. The three key support levels are: S1 – $3.669, S2 – $3.572, S3 – $3.429.