Natural gas trading outlook: futures fall on projections of warmer readings

Natural gas fell on Tuesday to extend losses into a second session as forecasting agencies projected temperatures to warm up by late next week.

Natural gas for delivery in April traded 1.52% lower at $2.849 per million British thermal units at 9:22 GMT, holding within a daily range of $2.906 and $2.840. The contract dropped 2.66% on Monday and closed at $2.893, having previously risen to its highest since January 16th at $3.045.

The Energy Information Administration data issued on Thursday showed that US natural gas inventories fell by 111 billion cubic feet in the week ended February 13th, compared to analysts’ projections for a drop in the range of 105-111 bcf and the five-year average decline of 180 bcf. Stockpiles slid by 247 bcf during the comparable period a year earlier.

Total gas held in US storage hubs amounted to 2.157 trillion cubic feet, forming a surplus of 2.8% to the five-year average of 2.099 trillion from last week’s deficit of 0.5%. The surplus over the year-ago inventory level of 1.479 trillion cubic feet expanded to 45.8% from 31.4% a week earlier.

The five-year-average surplus, however, is not expected to last long as last week’s widespread cold blasts across the northern, eastern and parts of the central US are factored in. This week’s report is expected to show an inventory decline well above the normal, probably over -200 bcf. The five-year average drop for the seven days ended February 20th is 131 billion cubic feet, while stockpiles fell by 117 bcf a year earlier.

According to NatGasWeather.com, natural gas demand in the US will be very high compared to normal through March 2nd.

The central and eastern US were hit by a yet another polar blast, which unlike the others managed to reach deep into the Plains and Texas. Weather systems will bring areas of snow, rain and ice during the next few days over the Southwest and Southeast, while overnight lows in the Midwest and Northeast will be close or below the zero mark.

The cold blasts are expected to hold their assault over the eastern US on Wednesday as they gather strength to return on Thursday and stay until Saturday. The blasts alongside colder temperatures over the majority of the central region are expected to trigger higher-than-expected heating demand as readings range between 15 and 30 degrees.

Meanwhile, weather systems will bring colder temperatures with areas of rain and snow over the western US. The southern and eastern regions of the country will enjoy warmer weather on Sunday and Monday as new weather systems arrive. However, these systems will be quickly followed by cold Canadian air.

Colder temperatures will persist over the weekend as weather systems bring areas of snow and rain while they move across the US. Readings in the northern, central, and eastern will be slightly below normal as outcome of those movements. However, temperatures are expected to warm up by late next week over these regions. Additionally, normal temperatures will reign over the western US.

Readings

According to AccuWeather.com, the mercury in New York on February 25th will range between 13 and 35 degrees Fahrenheit, below the average of 30 and 44, with projections of even colder temperatures on Thursday and Friday when lows will reach 10-11 degrees. Chicago will enjoy a bit warmer readings of between 10 and 29 today, still 10 degrees lower than usual, before it gets really cold with minimum readings of 4 degrees on 27th.

Down South, Houston will range between 38 and 56 degrees tomorrow, compared to the average 51-68, and ahead of the projected 53-60 temperature range on Saturday. On the West Coast, Los Angeles will enjoy mostly seasonal weather throughout February, with readings set to range between 54 and 44 degrees on February 26th, compared to the average 50-69.

Pivot Points

According to Binary Tribune’s daily analysis, April natural gas futures’ central pivot point stands at $2.932. In case the contract penetrates the first resistance level at $3.006 per million British thermal units, it will encounter next resistance at $3.119. If breached, upside movement may attempt to advance to $3.193 per mBtu.

If the energy source drops below its first support level at $2.819 per mBtu, it will next see support at $2.745. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.632 per mBtu.

In weekly terms, the central pivot point is at $2.897. The three key resistance levels are as follows: R1 – $3.082, R2 – $3.191, R3 – $3.376. The three key support levels are: S1 – $2.788, S2 – $2.603, S3 – $2.494.