Natural gas trading outlook: futures extend gains on warm conditions

Natural gas rose on Tuesday, adding to Mondays 5% advance, as warm weather across most of the US induced moderate and locally high cooling demand for natural gas, while a tropical Gulf storm moves inland today.

Natural gas for delivery in July traded 0.83% higher at $2.913 per million British thermal units at 08:09 GMT, shifting in a daily range of $2.925 – $2.905. The contract rose 5.05% on Monday to $2.889, extending the previous weeks 6.2% advance.

According to NatGasWeather.com, natural gas demand in the US will be moderate compared to normal through June 22nd, and locally high across the Southeast, with near-normal temperatures projected for the following seven days across most the country.

Tropical storm Bill is moving northwest at the speed of 13 mph and will reach the Texas coast today, the National Hurricane Center said, making landfall in the morning and then moving inland over south-central Texas this afternoon and tonight. A slight strengthening might be seen before reaching the coast, but it is expected to weaken to a tropical depression tonight as it moves inland. The storm will bring several inches of rain, but overall impacts on natural gas infrastructure will be minimal.

The eastern, western and southern US continue to experience very high afternoon highs, with the Southeast, including Florida, driving the nation’s strongest cooling demand as temperatures reach into the 90s, while the West sees highs in the 100s. Meanwhile, Canadian weather systems tracking through the Midwest and Northeast with showers and thunderstorms will provide several degrees of cooling, keeping highs in the 70s and lower 80s, while also dropping temperatures over the South and East by a few degrees.

Active weather will continue during the fourth week of June as well, NatGasWeather.com said, keeping temperatures near normal over most of the country, except for slightly warmer-than-usual readings across the Southeast which will see high pressure strengthen this weekend. The north-central US will continue to be impacted by Canadian weather systems spilling cooler air that would keep temperatures near usual or a few degrees below, while also pushing readings down by a few degrees in adjacent regions.

Weather developments after June 25th will require close monitoring as data remain inconclusive on whether high pressure will hold or it will give way to cooler Canadian air to spill across the border in a comfortable bearish pattern.

Readings

According to AccuWeather.com, New York today will reach 84 degrees on June 17th, 4 above usual, and highs will remain in the low 80s through June 24th. Chicago will peak at 78 degrees tomorrow, 3 below the average, with active conditions through the end of June set to cause temperatures to range between the mid 70s and low 90s, compared to the average 81-84 for the period.

Down South, Houston will reach 84 degrees today and tomorrow, below the normal 90, followed by a warm-up to seasonal afterwards. On the West Coast, the high in Los Angeles today will be 83 degrees, 5 above usual, and will remain in the low 80s through June 22nd before easing into the upper 70s.

Inventories

The Energy Information Administration reported last Thursday that natural gas inventories rose by 111 billion cubic feet in the week ended June 5th, in line with analysts’ median forecasts for a 112-113 bcf jump and well above the five-year average build of 89 bcf. Total gas held in US storage hubs amounted to 2.344 trillion cubic feet, expanding a surplus to the five-year average of 2.300 trillion to 1.9%, or 44 bcf, from 1.0% a week earlier.

This week’s report will show another above-average build, but closer to the average. Early estimates call for a gain of around 100 bcf for the week ended June 12th, compared to the five-year average inventory increase of 87 billion cubic feet and the year-ago build of 112 bcf.

Next week’s number, due out on June 25th, will likely come in even closer to the average, with early projections pointing to an inventory build of around 90 bcf for the week ended June 19th, compared to the five-year average gain of 86 bcf and the year-ago one of 110 bcf.

Pivot points

According to Binary Tribune’s daily analysis, July natural gas futures’ central pivot point stands at $2.857. In case the contract penetrates the first resistance level at $2.951 per million British thermal units, it will encounter next resistance at $3.012. If breached, upside movement may attempt to advance to $3.106 per mBtu.

If the energy source drops below its S1 level at $2.796 per mBtu, it will next see support at $2.702. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.641 per mBtu.

In weekly terms, the central pivot point is at $2.765. The three key resistance levels are as follows: R1 – $2.907, R2 – $3.063, R3 – $3.205. The three key support levels are: S1 – $2.609, S2 – $2.467, S3 – $2.311.