Natural gas trading outlook: futures slide ahead of EIA inventory data

Natural gas fell for a fourth day in five as seasonal and slightly warmer weather engulfed most of the US, while investors eyed the seasons first inventory build this Thursday.

Natural gas for delivery in May traded 2.21% lower at $2.748 per million British thermal units at 9:46 GMT, shifting in a daily range of $2.806-$2.732. The contract rose 1.8% on Tuesday to $2.810, ending three days of losses.

According to NatGasWeather.com, natural gas demand in the US will be low-moderate compared to normal through March 31st, with a neutral weather trend for the following seven days.

Milder temperatures will spread across the eastern US today after the latest in a series of cold blasts fizzled, establishing highs in the 50s and 60s. There will even be some cooling demand over the South and West today and on Thursday as highs reach into the 80s and locally 90s.

However, the warm-up wont last long as another series of cooler Canadian weather systems arrives on Thursday into Friday to the north-eastern regions, but will also push deep into the Southeast, including Texas. The eastern half of the country will see a period of stronger heating demand as lows drop to 10-20 degrees below usual. Lows will fall in the teens and 20s over the North, coupled with snow accumulations, while the Southeast experiences below-freezing temperatures as well.

The Northwest will also see snow and cooler readings but the remainder of the country will continue to enjoy warm and dry weather through the end of March.

A brief warm-up will take effect over the North and East on April 1-3rd but a fresh Canadian weather system with rain, snow and below-normal temperatures will follow right after and last through April 6th, NatGasWeather.com said. The central and southern regions of the US will remain near-seasonal due to occasional weather systems passing through, while the southwestern US enjoys mostly warm conditions.

Readings

According to AccuWeather.com, New York will see temperatures range between 43 and 46 degrees today, compared to the average 38-53, and will remain slightly below-usual through the first week of April. The high in Chicago on March 28th will be 30 degrees, 22 below usual, before rebounding to 51 degrees on March 30-31st.

Down South, Houston will see temperatures peak at 79 degrees on March 26th, 4 above usual, before establishing in the 80s as of March 30th. Readings in Los Angeles will max out at 94-95 degrees on March 26-27th, compared to the average 71, before easing to the upper 70s and lower 80s the following seven days.

Inventory report

Thursday’s supply report will likely register a small inventory build, around 20 billion cubic feet, as most of the US enjoyed seasonal and warmer weather last week, while a cold blast across the Northeast had a limited reach. The five-year average withdrawal for the week ended March 20th is 19 billion cubic feet, while the year-ago storage drop was -56 bcf.

The following report, due on April 2nd, may reflect a near-average or slightly thinner inventory decline as widespread seasonal and warmer weather persists, while the north-eastern US sees a cold break mid-week. The five-year average withdrawal for the week ending March 27th is -22 bcf, while gas in storage declined by 71 bcf a year ago. Inventories are unlikely to gain much ground on deficits over the next three supply reports as cold Canadian air lurks across the border.

The Energy Information Administration reported last Thursday that US natural gas stockpiles fell 45 billion cubic feet in the week ended March 13th, matching the five-year average drop but falling short of analysts’ median estimate of -48 bcf. Total gas held in US storage hubs amounted to 1.467 trillion cubic feet, 13.3% below the five-year average inventory level of 1.692 trillion and 52.8% above year-ago stockpiles at 960 trillion cubic feet.

Pivot points

According to Binary Tribune’s daily analysis, May natural gas futures’ central pivot point stands at $2.801. In case the contract penetrates the first resistance level at $2.842 per million British thermal units, it will encounter next resistance at $2.874. If breached, upside movement may attempt to advance to $2.915 per mBtu.

If the energy source drops below its S1 level at $2.769 per mBtu, it will next see support at $2.728. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.696 per mBtu.