Natural gas trading outlook: futures rise third day before supply data

Natural gas rose for a third day as weather forecasts calling for cold weather across the eastern US spurred speculations for higher heating demand, but gains remained in check as extended outlooks showed mild temperatures across the central and southern US, limiting national natural gas usage. Market participants awaited the release of EIAs weekly storage data.

Natural gas for delivery in December traded at $3.821 per million British thermal units at 14:58 GMT, up 0.87% on the day. Prices shifted in a daily range of $3.823-$3.768. The power-station fuel rose by 1.53% on Wednesday to $3.788, having earlier risen to a two-week high of $3.849 per mBtu. The contract is up 3.3% so far this week.

According to NatGasWeather.com, natural gas demand over the next seven days will be moderate compared to normal, with a neutral weather trend for the November 6-12 span.

Most of the US will enjoy comfortable readings today before a cold Canadian weather system tracks into the Great Lakes and eastern US tonight. The cold front will push lows into the 30s and 20s throughout the weekend, while also carrying light snowfall. It will also extend into the Southeast, pushing overnight lows into the 30s. The West Coast will see Pacific storms carrying cooler conditions.

Early next week the central and southern US will warm up, NatGasWeather.com reported, with readings again becoming mild. Cool weather systems, however, will track across the Midwest and Northeast mid-week, bringing showers and little-below-normal readings. The West is expected to remain dominated by cooler conditions.

However, despite the colder-than-normal weather across large parts of the US, mild longer-term weather patterns, particularly for the central and southern US, failed to persuade investors to push the market much further after the previous two days 4.1% advance. All eyes are pointed at todays supply data, due at 14:30 GMT.

Storage figures

The Energy Information Administration reported last Thursday that US natural gas stockpiles rose by 94 billion cubic feet (bcf) during the week ended October 17th, compared to analysts’ projections for a jump in the range of 95-98 bcf. This was the 27th consecutive above-average weekly build.

Total gas held in US storage amounted to 3.393 trillion cubic feet as of last week, narrowing the gap to the five-year average of 3.731 trillion to 9.1%. Year-on-year, gas levels were 9.0% lower.

The EIA is expected to report the 28th consecutive above-average weekly build today, given last week’s mostly seasonal and above-seasonal readings across the US. Natural gas inventories are projected to have risen by around 85 billion cubic feet in the seven days through October 24th, compared to the five-year average increase of 59 bcf and the 45-bcf gain during the comparable period a year ago. A reading above 89-90 billion cubic feet would be considered strongly bearish, while a build at 80 bcf and below – bullish.

Temperatures

According to AccuWeather.com, readings in New York on November 2nd will range between 39 and 49 degrees Fahrenheit, below the average of 45-58, before warming up 47-60 degrees four days later. Chicago will drop to 34 degrees on November 1st, 7 below usual, before rising to the seasonal 39-54 degrees on November 6th.

Down South, temperatures in Texas City will max out at the seasonal 77 degrees tomorrow, before rising to the above-average 80 degrees on November 3-4, followed by a decrease to mostly seasonal levels over the next four days. On the West Coast, the high in Los Angeles on November 1st will be 69 degrees, 7 beneath normal, before rising to 75-76 degrees on November 6-7.

Pivot points

According to Binary Tribune’s daily analysis, December natural gas futures’ central pivot point stands at $3.778. In case the contract penetrates the first resistance level at $3.859 per million British thermal units, it will encounter next resistance at $3.931. If breached, upside movement may attempt to advance to $4.012 per mBtu.

If the energy source drops below its first support level at $3.706 per mBtu, it will next see support at $3.625. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.553 per mBtu.