Natural gas trading outlook: futures little changed ahead of EIA inventory data

Natural gas was mostly steady in early European trading on Thursday as investors waited for the Energy Information Administrations weekly US inventory data and as forecasts for active weather through the end of August spurred mixed sentiment.

Natural gas for delivery in September traded 0.33% lower at $2.707 per million British thermal units at 07:49 GMT, shifting in a narrow daily range of $2.713 – $2.705. The contract rose 0.4% on Wednesday to $2.716, ending two days of sizable losses.

The Energy Information Administration is expected to report today another above-average inventory build as continued comfortable conditions across the northern US during the tracked period managed to negate the effect of very strong cooling demand over the southern half of the country. The government agency will likely say stockpiles rose by 58 billion cubic feet during the week ended August 14th, according to analysts median estimate, although NatGasWeather.com projects a build of about 65 bcf due to tighter supply related to maintenance. The five-year average gain for the week is 54 bcf, while supplies rose by 86 bcf a year earlier.

Data last Thursday showed an above-normal injection of 65 billion cubic feet for the seven days ended August 7th which brought the total gas held in US storage hubs to 2.977 trillion cubic feet, expanding a surplus over the five-year average of 2.896 trillion to 2.8% from 2.2% a week earlier.

Next week’s report, however, will likely bring a smaller-than-usual inventory build as very warm to hot temperatures across the US the past weekend and early this week offset the cooler system currently tracking across the northern US. Supplies are projected to rise by about 55 bcf during the week ended August 21st, below the five-year average increase of 61 bcf and the year-ago one of 77 bcf.

Weather

National natural gas demand in the US will be moderate compared to normal today and tomorrow as an unseasonably strong weather system continues its movement through the east-central US, carrying heavy showers, thunderstorms and cooler than usual temperatures, while another stalled system keeps the far southern Texas and the South cooler.

The East will remain relatively warm as high pressure deflects the central US system back into Canada when it arrives on Thursday, which will be followed by the return of hot high pressure over the South and East through the weekend. This will once again beef up national natural gas demand to high compared to normal.

However, a new system will develop over the countrys north-central regions late in the weekend into Monday, NatGasWeather.com said, dropping demand back to moderate. Its path of movement will determine near-term weather sentiment and it currently looks as the system could track across the entire northern US, dropping highs across many important consuming regions to comfortable below-normal levels, which will help offset strong demand over the warmer southern half of the country.

As the week progresses, very warm to hot temperatures will once again engulf the eastern, central and southern US, but the West will enjoy cooler-than-normal conditions as Pacific weather systems track inland.

Readings

According to AccuWeather.com, highs in New York will be in the mid 80s through the end of the month, compared to the usual 80-82, followed by a drop to the upper 70s and 80. Chicago will max out in the upper 70s and low 80s through August 26th, before warming up slightly through September 1st.

Down South, Houston will fail to exceed 90 degrees today, 3 below usual, with highs set to be in the low-mid 90s for the remainder of the month. On the West Coast, Los Angeles will see temperatures peak at 81-82 degrees the next couple of days, beneath the average 85, followed by a warm-up to the mid 80s next week.

Pivot points

According to Binary Tribune’s daily analysis, September natural gas futures’ central pivot point stands at $2.716. In case the contract penetrates the first resistance level at $2.739 per million British thermal units, it will encounter next resistance at $2.761. If breached, upside movement may attempt to advance to $2.784 per mBtu.

If the energy source drops below its S1 level at $2.694 per mBtu, it will next see support at $2.671. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.649 per mBtu.

In weekly terms, the central pivot point is at $2.839. The three key resistance levels are as follows: R1 – $2.896, R2 – $2.992, R3 – $3.049. The three key support levels are: S1 – $2.743, S2 – $2.686, S3 – $2.590.