Natural gas trading outlook: futures steady on seasonal weather

Natural gas was little changed on Tuesday as mostly seasonal temperatures persisted across the US, curbing national natural gas demand.

Natural gas for delivery in May was up 0.36% at $2.520 per million British thermal units at 8:41 GMT, shifting in a daily range of $2.528-$2.502. The contract settled at $2.511 on Monday, unchanged from the prior session, having earlier fallen to $2.475, the lowest since June 2012.

According to NatGasWeather.com, natural gas demand in the US will be low compared to normal through April 20th, with a slightly cooler weather trend for the eastern US over the following seven days, while the West becomes somewhat warmer.

An active Spring pattern continues over much of the US. Texas and the southeastern US will see heavy showers and thunderstorms over the next few days as a weather system tracks through, preventing readings from becoming too hot as highs reach the upper 60s to lower 80s. As the current week progresses, mild temperatures peaking in the 60s and lower 70s will once again establish over the Great Lakes and the Ohio Valley.

Heating demand for the next two weeks will be determined by two Spring storms. The first one will push inland through the northwestern US and reach the Plains on Thursday. However, it will fail to tap any truly cold Canadian air and will only bring a brief cooling to the Great Lakes and East on Friday into Saturday, NatGasWeather.com reported.

A more significant storm is expected to develop late this weekend and early next week, impacting much of the central and eastern regions of the country with heavy showers. The system has a better chance of tapping colder Canadian air, but will also miss the frigid Arctic air pool.

Typical Spring weather patterns will keep readings across the East, South and Midwest near normal or slightly cooler next week, while the West remains dominated by high pressure, resulting in near or somewhat warmer-than-usual temperatures.

Readings

According to AccuWeather.com, readings in New York will peak at 68 degrees Fahrenheit on April 16th, 6 above usual, before dropping to the upper 50s and lower 60s through the rest of the month. The high in Chicago will be 60 degrees, matching the average, and will remain nearby through April 20th, before falling to the mid 50s over the following 7 days.

Down South, Houston will see readings max out at 81-82 degrees through April 17th, 2-3 degrees above usual, before easing a few degrees through April 25th. On the West Coast, Los Angeles will reach 85 degrees on April 16th, 12 above normal, but highs will drop in the low-mid 70s during the period of April 17-30th.

Supplies

The Energy Information Administration reported last Thursday that US natural gas stockpiles rose by 15 billion cubic feet in the week ended April 3rd, exceeding analysts estimates for a 10-11-bcf inventory jump. This compared to the five-year average decline for the period of -2 bcf, while stockpiles fell by 8 bcf during the comparable period a year earlier.

Total gas held in US storage hubs amounted to 1.476 trillion cubic feet, narrowing a deficit to the five-year average of 1.649 trillion to 10.5% from 11.5% a week earlier. Supplies were 78.9% above year-ago stockpiles levels.

This Thursdays EIA report will probably register a slightly larger than average build due to last week’s widespread mild conditions. The five-year average inventory gain for the week ended April 10th is +35 billion cubic feet, while supplies rose by 22 bcf during the same week a year earlier.

Pivot points

According to Binary Tribune’s daily analysis, May natural gas futures’ central pivot point stands at $2.510. In case the contract penetrates the first resistance level at $2.544 per million British thermal units, it will encounter next resistance at $2.578. If breached, upside movement may attempt to advance to $2.612 per mBtu.

If the energy source drops below its S1 level at $2.476 per mBtu, it will next see support at $2.442. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.408 per mBtu.

In weekly terms, the central pivot point is at $2.575. The three key resistance levels are as follows: R1 – $2.645, R2 – $2.780, R3 – $2.850. The three key support levels are: S1 – $2.440, S2 – $2.370, S3 – $2.235.