Natural gas trading outlook: futures steady with focus on inventory data

Natural gas traded slightly higher in early European trading hours on Wednesday after two days of losses as investors looked ahead to Thursdays government supplies data, while weather forecasts saw no overnight changes.

Natural gas for delivery in June traded 0.44% higher at $2.961 per mBtu at 7:59 GMT, shifting in a daily range of $2.969-$2.943. The contract fell 2.06% on Tuesday to $2.948 per mBtu.

Tomorrows inventory data by the Energy Information Administration is expected to show that US natural gas stockpiles rose by around 100 billion cubic feet during the week ended May 15th, less than initially expected. Still, if confirmed, this would help draw supplies closer to flipping into a surplus to the average. The five-year average gain for the week is 89 bcf, while inventories rose by 106 bcf a year earlier.

Prices rallied last week after the EIA said that US natural gas inventories rose by 111 billion cubic feet in the week ended May 8th, below analysts’ consensus forecast of 116 bcf. Despite the comfortable readings, analysts attributed the surprisingly low build to a drop in production due to maintenance, as well as stronger exports. Total gas held in US storage hubs amounted to 1.897 trillion cubic feet, narrowing the deficit to the five-year average of 1.935 trillion to 2.0%, or 38 bcf, from 3.6% a week earlier.

Next weeks report, due out on May 28th, will likely reflect a larger gap to the average, as compared to this week’s data. The five-year average build for the week ended May 22nd is 95 billion cubic feet, while supplies rose by 113 bcf during the comparable period a year earlier.

Weather

Overall bearish weather is set to persist through the end of the month, with a few exceptions. According to NatGasWeather.com, natural gas demand in the US will be very low to low, compared to normal, through May 26th.

A cool blast over the northern US continues its march into the Northeast, pushing readings several degrees below normal. Another stronger blast will hit the Northeast on Thursday into Friday, inducing a period of stronger heating demand. However, this series of weather systems will likely be the worst that remains of the winter season, before temperatures swiftly rebound during the weekend.

Weather systems with showers and thunderstorms will track out of the Plains and into the east-central US the next few days, as well as into Texas and the West. The South, and especially Southeast, will drive the strongest cooling demand through the end of the month as highs reach the upper 80s and lower 90s.

As next week progresses and June begins, active weather in typical spring fashion will continue, NatGasWeather.com said. The northern US will remain near normal, with Midwest temperatures locally falling a few degrees below usual, while the South, including Texas and the southern Plains, becomes very warm with widespread 90s. Conditions over the western US will remain cooler due to Pacific weather systems, before the region warms up to above normal in early-June.

Readings

According to AccuWeather.com, the high in New York on May 21st will be 69 degrees Fahrenheit, 3 below normal, before rising to 79 degrees three days later. Chicago will peak at 52 degrees today, 20 below normal, before recovering to the upper 60s and low 70s afterwards.

Down South, readings in Houston will max out at 87 degrees today and will remain in the low-mid 80s for the rest of the month, compared to the average 86-88 degrees. On the West Coast, highs in Los Angeles will range between 67 and 73 degrees through May 26th, compared to the usual 74-75, followed by a slight warm-up through the end of May.

Pivot points

According to Binary Tribune’s daily analysis, June natural gas futures’ central pivot point stands at $2.997. In case the contract penetrates the first resistance level at $3.056 per million British thermal units, it will encounter next resistance at $3.164. If breached, upside movement may attempt to advance to $3.223 per mBtu.

If the energy source drops below its S1 level at $2.889 per mBtu, it will next see support at $2.830. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.722 per mBtu.

In weekly terms, the central pivot point is at $2.946. The three key resistance levels are as follows: R1 – $3.106, R2 – $3.197, R3 – $3.357. The three key support levels are: S1 – $2.855, S2 – $2.695, S3 – $2.604.