Natural gas trading outlook: futures edge up on cold North, EIA data eyed

Natural gas rose for a second day as weather forecasts continued to call for below-usual readings across the northern US, with more cold systems to come. However, gains were capped as the rest of the country enjoys seasonal or warmer conditions, while the EIA will likely report a thin inventory decline on Thursday.

Natural gas for delivery in March traded 1.42% higher at $2.634 per million British thermal units at 9:50 GMT, having shifted in a daily range of $2.639-$2.609. The contract rose 0.70% on Monday to $2.597, ending three consecutive days of losses. Prices slid 4.1% last week, capping a tenth weekly decline in eleven, having fallen to $2.567 on Friday, the lowest since June 2012.

According to NatGasWeather.com, natural gas demand in the US will rise from moderate to high through February 16th, with a warm weather trend for the western US for the following seven days, while the central regions remain neutral and the Northeast and Great Lakes turn colder.

The western and central US continue to enjoy above-normal temperatures with highs reaching in the upper 60s to lower 80s, including over Texas and southern California. A much colder system will hit the northern US on Wednesday, pushing overnight lows across the Great Lakes and Northeast into the single digits and below zero and inducing much stronger heating demand.

A stronger cold blast will follow on Saturday and will manage to extend sub-freezing conditions into portions of the southeastern US, NatGasWeather.com said, pushing lows to the teens and 20s.

Next week, the western and central US will continue to enjoy seasonal or warmer temperatures, while cold weather systems track across the Midwest into the East, carrying rain, snow and colder-than-usual readings. However, the most frigid Arctic air will remain confined to the Great Lakes and Northeast. Readings will be 10-30 degrees Fahrenheit below usual but there will be brief pauses of moderation to near-seasonal levels.

Temperatures

According to AccuWeather.com, readings in New York on February 12th will range between 14 and 34 degrees Fahrenheit, compared to the average 28-41, but will drop to as much as 4-17 degrees three days later. A return to seasonal and slightly below-seasonal readings is expected after February 20th. The low in Chicago on February 12th will be 3 degrees Fahrenheit, 18 beneath seasonal, and readings will bottom at 1 degree two days later, before reaching above-average levels on February 20th.

Down South, highs in Houston will reach 73 degrees tomorrow, 8 above the usual, and will remain mostly seasonal for the remainder of the month. On the West Coast, Los Angeles will see readings peak at 84-88 degrees over the next four days, compared to the average of 68, before easing to seasonal and slightly higher levels through the rest of February.

Supplies

The Energy Information Administration reported last Thursday that US natural gas inventories fell by 115 billion cubic feet in the seven days through January 30th. 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 this Thursdays report, is likely to be near the five-year average of 178 billion cubic feet as the recent cold blasts over the North and East are factored in. Inventories declined by 234 bcf during the comparable week a year earlier.

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 are likely to turn deficits to the five-year average into surpluses. However, the persisting cold conditions over the North and this weekends spreading into into the Southeast will prevent any surpluses from expanding and keep supplies near the average through the end of the month.

Pivot Points

According to Binary Tribune’s daily analysis, March natural gas futures’ central pivot point stands at $2.619. In case the contract penetrates the first resistance level at $2.666 per million British thermal units, it will encounter next resistance at $2.736. If breached, upside movement may attempt to advance to $2.783 per mBtu.

If the energy source drops below its first support level at $2.549 per mBtu, it will next see support at $2.502. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.432 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.