Natural gas trading outlook: futures ease on mild weather

Natural gas fell on Wednesday as most of the US continued to enjoy seasonal and slightly warmer temperatures. Gains were limited, however, ahead of Thursdays expectedly above-average inventory decline and as extended forecasts showed a return of cooler temperatures to the north-eastern US next week.

Natural gas for delivery in April traded 0.77% lower at $2.711 per million British thermal units at 9:45 GMT, shifting in a daily range of $2.739-$2.699. The contract rose 2.02% yesterday to $2.732 after it plunged almost 5.7% the prior session.

According to NatGasWeather.com, natural gas demand in the US will be low-to-moderate compared to normal through March 17th, with a slightly cooler weather trend for the eastern regions over the next seven days, while the West turns somewhat warmer.

The majority of the US continues to experience near-seasonal temperatures, with highs peaking in the 60s and 70s, apart from the Great Lakes and Northeast where readings max out in the 40s and 50s. A slow-moving system has brought periods of showers across the southern and east-central US and will reach the Northeast this weekend, carrying rain, snow and slightly cooler-than-normal readings.

A strong Canadian front will hit the upper Great Lakes and Northeast on Thursday into Friday, NatGasWeather.com said, but it is not expected to push deep into the US, keeping heating demand limited. The countrys western and central regions, apart from Texas, will remain warmer than normal over the next seven days.

As next week progresses, Canadian weather systems will bring rain, snow and below-normal temperatures to the Great Lakes and eastern US, strengthening heating demand enough to keep inventory withdrawals near or above the average. The western US will enjoy warm and dry weather, while the South remains near or slightly cooler than seasonal as cooler northern air reaches southward. The central US will also experience near-seasonal conditions.

Readings

According to AccuWeather.com, the high in New York on March 14th will be 50 degrees Fahrenheit, 1 above usual, and readings are expected to ease to 5-10 degrees below usual between March 18-25th. Chicago will see the mercury range between 40 and 53 degrees on March 13th, compared to the average 30-46, before reaching 59 degrees four days later.

Down South, temperatures in Houston will be near-seasonal through March 20th, peaking at 73 degrees on March 15th, 3 above usual. On the West Coast, Los Angeles will see readings reach 91 degrees on March 14-15th, followed by a drop to the 70s as of March 18th.

Supplies

This Thursday’s EIA inventory report will show another withdrawal well above the average, around -175 to -195 bcf, as last week’s Arctic outbreak is factored in, bringing deficits to above -200 bcf. The five-year average inventory decline for the week ending March 6th is 116 billion cubic feet, while stockpiles fell by 189 bcf a year ago.

However, this past weekend and the current week’s thaw will end the recent string of hefty inventory declines, causing a much thinner withdrawal for the March 19th report, especially as the upcoming cold Canadian front over the North turned less bullish. The five-year average draw for the week ending March 13th is 45 bcf, while stockpiles slid by 69 bcf a year ago.

The Energy Information Administration reported last Thursday that US natural gas stockpiles fell by 228 billion cubic feet in the seven days through February 27th, in line with analysts’ expectations for a decline in the range of 222-235 bcf. Total gas held in US storage hubs amounted to 1.710 trillion cubic feet last week, expanding a deficit to the five-year average inventory level of 1.853 trillion to 7.7%, or -143 bcf, from 1.5% a week earlier.

Pivot points

According to Binary Tribune’s daily analysis, April natural gas futures’ central pivot point stands at $2.719. In case the contract penetrates the first resistance level at $2.754 per million British thermal units, it will encounter next resistance at $2.777. If breached, upside movement may attempt to advance to $2.812 per mBtu.

If the energy source drops below its first support level at $2.696 per mBtu, it will next see support at $2.661. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.638 per mBtu.

In weekly terms, the central pivot point is at $2.783. The three key resistance levels are as follows: R1 – $2.926, R2 – $3.012, R3 – $3.155. The three key support levels are: S1 – $2.697, S2 – $2.554, S3 – $2.468.