Natural gas trading outlook: futures steady ahead of EIA data

Natural gas inched up on Wednesday after tumbling almost 5% the previous two days as weather forecasts continued to call for overall comfortable readings across the US, while a report by the EIA tomorrow is expected to show a slightly larger-than-average inventory build.

Natural gas for delivery in July traded 0.60% higher at $2.866 per million British thermal units at 08:36 GMT, shifting in a daily range of $2.867-$2.847. The contract slid 2.4% on Tuesday to $2.849 following a 2.5% drop the day before.

According to NatGasWeather.com, natural gas demand in the US will be low compared to normal through June 2nd. Very warm temperatures will engulf the southern and eastern US through the end of the week, with highs in the mid-upper 80s over major Mid-Atlantic cities. Readings will be quite comfortable across the West and central US, limiting demand for heating and cooling as highs hover near the 70s. Rains and thunderstorms continue over Texas and the southern Plains, while a stronger system pushes into the north-central US later this week and brings some cooling to the Northeast and Great Lakes during the weekend.

Active weather with showers and thunderstorms will continue across the US in early June. Most of the country will be warmer than usual next week, especially the East and West, while the central US is impacted by some cool Canadian blasts that will keep temperatures near normal. Readings over Texas and the southern Plains will also rise into the upper 80s and 90s, but showers and thunderstorms will continue.

Readings

According to AccuWeather.com, readings in New York will peak in the low-mid 80s through May 31st, compared to the average 74-75, before easing back to the mid 70s the next few days. Chicago will be near or slightly warmer than usual through June 5th, apart from a two-day period of cooling on May 30-31st when highs drop to 59-64 degrees Fahrenheit, compared to the usual 75.

Down South, temperatures in Houston will max out at 86-88 degrees the next two days, near the average of 88, before dropping a few degrees after that. On the West Coast, highs in Los Angeles will remain in the 70s through May 29th, followed by a warm-up into the low-mid 80s the next six days.

Inventories

The Energy Information Administration reported last Thursday that US natural gas stockpiles rose by 92 billion cubic feet in the week ended May 15th, mismatching analysts’ projections for a 96-97-bcf gain, although still above the five-year average build of 89 bcf. Total gas held in US storage hubs amounted to 1.989 trillion cubic feet, narrowing a deficit to the five-year average of 2.024 trillion to 1.7%, or 35 bcf, from 2.0% a week earlier.

Estimates for tomorrows inventory report point to a build of around 100 bcf during the week ended May 22nd, compared to the five-year average of 95 billion cubic feet, while supplies rose by 113 bcf during the comparable period a year earlier.

The report after, due out on June 4th, is expected to show a larger gap to the average, as compared to this weeks data, with the five-year average build for the week ended May 29th pegged at 92 bcf, while supplies rose by 118 bcf a year earlier.

Pivot points

According to Binary Tribune’s daily analysis, July natural gas futures’ central pivot point stands at $2.860. In case the contract penetrates the first resistance level at $2.901 per million British thermal units, it will encounter next resistance at $2.954. If breached, upside movement may attempt to advance to $2.995 per mBtu.

If the energy source drops below its S1 level at $2.807 per mBtu, it will next see support at $2.766. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.713 per mBtu.

In weekly terms, the central pivot point is at $2.994. The three key resistance levels are as follows: R1 – $3.075, R2 – $3.231, R3 – $3.312. The three key support levels are: S1 – $2.838, S2 – $2.757, S3 – $2.601.