Natural gas trading outlook: futures edge up on colder Northeast, Great Lakes

Natural gas rose on Monday, ending three days of losses, as forecasting agencies projected temperatures to reach below zero over the Northeast and Great Lakes, spurring higher heating demand.

Natural gas for delivery in March rose 0.62% to $2.595 per million British thermal units by 15:10 GMT, having shifted in a daily range of $2.688-$2.571. The contract slid 0.81% on Friday to $2.579, having previously fallen to its lowest since August 2012 at $2.567.

According to NatGasWeather.com, natural gas demand in the US through February 14th will be moderate compared to normal, but becoming high late in the week, with a warm weather trend for the west, neutral in the central US and cold over the Northeast and Great Lakes for the following seven days.

The West coast will be experiencing heavy rains on Monday with very high levels of snow. The Midwest and Northeast will be hit by another wave of moderate to heavy snowfall, with major accumulations expected over New England, where snow levels could reach higher than one foot.

Meanwhile, the western and central US will enjoy warmer-than-normal readings over the next few days, with highs ranging between the higher 60s and lower 80s, Texas and California included.

However, a very cold system will move into the northern US Wednesday through Friday, specifically over the Great Lakes and Northeast where lows are expected fall to near or below the zero mark. The cold system is expected to be aided by new cold blasts arriving next weekend, NatGasWeather.com said, but the cold push is not projected to reach very far west or south.

During the weekend, the western and central US will be warmer than average as high pressure dominates the regions. Rain, snow and colder readings will follow a continuation of weather systems, which flow through the Midwest and crash into the East. Extremes are expected over the Northeast and Great Lakes with temperatures reaching 10 to 30 degrees below normal as Arctic air sweeps through.

Temperatures

According to AccuWeather.com, readings in New York on February 10th will range between 23 and 37 degrees Fahrenheit, compared to the average 28 and 41, and will remain below normal through the middle of February. Readings in Chicago will range between 6 and 32 on February 11th, versus the average of 21-34, and will max out at 22 degrees on February 16th.

Down South, temperatures in Houston will range between 46 and 71 degrees on February 10th, above the usual 48-65, with projections to moderate to seasonal levels on February 16th. On the West Coast, the high in Los Angeles will be 83 degrees on Wednesday, 15 above usual, before readings fall to the average 68 on February 18th.

Inventories

The Energy Information Administration reported on Thursday that US natural gas inventories fell by 115 billion cubic feet in the seven days through January 30th, below analysts’ projections for a withdrawal in the range of 117-123 bcf. This compared to the five-year average of 165 bcf, while inventories declined by 259 bcf during the comparable period a year earlier.

Total gas held in US storage hubs amounted to 2.428 trillion cubic feet, narrowing the deficit to the five-year average stockpiles of 2.457 trillion to 1.2%, or 29 bcf, from 3.0% a week earlier. The surplus to the year-ago storage of 1.960 trillion cubic feet expanded to 23.9% from 14.6% during the preceding period.

Last week’s drop, to be reflected in February 12th’s report, is likely to be much closer to the average as the recent cold blasts over the North and East are factored in. However, last weekend and this week’s warm-up over the central, southern and western US is likely to lead to a much thinner withdrawal for the following report due at February 19th. Supplies through the third week of February basically stand a chance of turning deficits to the five-year average into surpluses.

Pivot Points

According to Binary Tribune’s daily analysis, March natural gas futures’ central pivot point stands at $2.593. In case the contract penetrates the first resistance level at $2.618 per million British thermal units, it will encounter next resistance at $2.658. If breached, upside movement may attempt to advance to $2.683 per mBtu.

If the energy source drops below its first support level at $2.553 per mBtu, it will next see support at $2.528. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.488 per mBtu.

In weekly terms, the central pivot point is at $2.643. The three key resistance levels are as follows: R1 – $2.719, R2 – $2.859, R3 – $2.935. The three key support levels are: S1 – $2.503, S2 – $2.427, S3 – $2.287.