Natural gas trading outlook: futures drop on weather, EIA report eyed

Natural gas fell on Wednesday as weather forecasts saw no overnight changes and continued calling for cooler conditions across the North, while the rest of the country remains mild, with more bearish headwinds to come.

Natural gas for delivery in May traded 0.54% lower at $2.561 per million British thermal units at 7:40 GMT, shifting in a daily range of $2.580-$2.554. The contract rose 1.5% on Tuesday to $2.575, having plunged 3.7% the previous session.

According to NatGasWeather.com, natural gas demand in the US will be moderate compared to normal through April 28th, with a slightly warmer weather trend for the western and central US over the following seven days, while the East warms up as well.

A cool blast with showers and thunderstorms will hit the Great Lakes and eastern US today, pushing readings to below normal and inducing moderate heating demand as overnight lows reach the 20s and 30s. Texas and portions of the southern US will see showers and severe thunderstorms, while the far southern US will be quite warm, with highs reaching the 80s, and locally 90s. The country’s western regions will remain mostly mild, with some periods of cooling.

Active weather will continue to dominate the US next week as well, in a typical Spring fashion with showers and thunderstorms. Readings across the Midwest and northeastern US will remain slightly cooler than normal, while the eastern, central and western parts of the country enjoy near-seasonal weather. Warmer temperatures will gradually engulf the north-eastern US end-April and early-May, while the remainder of the country becomes warmer than usual.

“Overall, we continue to view the pattern as slightly bearish through the rest of the month, and then more strongly so early in May as milder temperatures arrive into the northern US, ushering in comfortable highs of 60s and 70s,” NatGasWeather.com said in a Tuesday mid-day update.

Readings

According to AccuWeather.com, highs in New York on April 23-25th will be 54-58 degrees Fahrenheit, compared to the average 64-65, before rising back into the 60s afterwards. Temperatures in Chicago will peak at 50-54 degrees through April 30th, below the usual 62-65 for the period, followed by a warm-up to the upper 50s and lower 60s.

Down South, Texas City will reach 82 degrees tomorrow, 5 above normal, and will top 86 degrees on April 25th, before easing back to the lower 80s and upper 70s the following week. On the West Coast, Los Angeles will see readings max out at 67-68 degrees on April 22-24th, followed by a warm-up into the mid-70s and low 80s for the rest of the month.

Supplies

Tomorrow’s inventory report by the Energy Information Administration is expected to show a larger-than-average build in stockpiles, around 90-100 billion cubic feet, as overall warm temperatures covered most of the US last week. If confirmed, this would narrow deficits to below 100 bcf. The five-year average inventory gain for the week ended April 17th is +46 billion cubic feet, while stockpiles grew by 45 bcf during the comparable period a year earlier.

The following report, due out on April 30th, will likely also reflect a larger-than-normal inventory build as overall mild readings persist. The five-year average build for the week ended April 24th is +55 bcf, while supplies rose by 77 bcf during the comparable period a year earlier.

The EIA said last Thursday that natural gas stockpiles in the US expanded by 63 billion cubic feet in the week ended April 10th, exceeding analysts’ median estimate for a 53-55 bcf gain. Total gas held in US storage hubs amounted to 1.539 trillion cubic feet, narrowing a deficit to the five-year average of 1.684 trillion to 8.6% from 10.5% a week earlier. Supplies were at a surplus of 81.7% to year-ago inventories of 847 bcf.

Pivot points

According to Binary Tribune’s daily analysis, May natural gas futures’ central pivot point stands at $2.568. In case the contract penetrates the first resistance level at $2.604 per million British thermal units, it will encounter next resistance at $2.632. If breached, upside movement may attempt to advance to $2.668 per mBtu.

If the energy source drops below its S1 level at $2.540 per mBtu, it will next see support at $2.504. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.476 per mBtu.

In weekly terms, the central pivot point is at $2.601. The three key resistance levels are as follows: R1 – $2.726, R2 – $2.819, R3 – $2.944. The three key support levels are: S1 – $2.508, S2 – $2.383, S3 – $2.290.