Natural gas futures were lower during early trade in Europe today. Cool US weather, coupled with booming shale gas production is pressuring prices ahead of the EIA weekly report on Thursday.
Front month natural gas futures, due in August, dropped 0.55% at the New York Mercantile Exchange to trade for $4.124 per million British thermal units at 9:22 GMT today. Prices ranged from $4.115 to $4.158 per mBtu. The contract added 0.02% on Monday, though it reached a six-month low of $4.092 per mBtu, after having dropped 6% last week, pressured by cool US weather.
The Marcellus shale deposit in the US Northeast is logging record output, Bloomberg reported. Gross output from the region will average 15.235 billion cubic feet a day this month, up 28 percent from a year earlier, the EIA said in a report yesterday.
“This is the latest round of big numbers from the Marcellus,” Martin King, an analyst with FirstEnergy Capital Corp. in Calgary, said for Bloomberg yesterday. “There’s too much supply in the region and there’s not enough takeaway capacity. That regional sentiment is probably weighing on Nymex prices to some degree,” he added.
The US Energy Information Administration (EIA) reported on natural gas stockpiles weekly build up last Thursday, to reveal a 93 Billion cubic feet (Bcf) gain for inventories, 21 Bcf more than the 5-year average gain for the week. NatGasWeather.com had predicted an injection of 86-92 Bcf, while a Bloomberg survey had projected 89 Bcf.
NatGasWeather.com suggested an injection of 95-100 Bcf will be reported in this week’s log, about 25 Bcf more than the 5-year average gain for the reported week. However, next weeks build up is suggested to be some 45-50 Bcf above the average, which would be the biggest gain this summer season.
Levels remain 24.4% below readings from last year, but confidence that stockpiles will replenish completely before the start of heating season in November grows.
US weather report
NatGasWeather.com reported on Tuesday that the cold blast from Canada continues southwards through the eastern and central US, to reach as far as Texas, dragging temperatures down. Readings behind the cool front are projected to be some 15-20 degrees Fahrenheit below average at places. The system will also bring many showers and locally heavy rains. The extreme southern and the western US remain in the grips of strong and resilient high pressure, supporting the moderately high temperatures. Later this week, higher pressure will be coming to the Midwest and Northeast as well, normalizing temps after the cold Canadian blast. Cooling demand over the next seven days will probably remain lower than normal.
In the 8-14 day outlook, NatGasWeather.com projected a neutral trend for the US. Higher pressure will be returning to the northeastern half of the US after the cooler Canadian system passes by early in the projected period. However, more blasts will be pushing southwards into the Northeast and Midwest later in the period, probably lowering temps again.
According to AccuWeather.com, New York will be moderately warm today, with temperatures between 70 and 82 degrees Fahrenheit. Several thunderstorms, some strong, are expected through to Thursday, though temps will remain relatively unchanged at slightly below-seasonal levels. Chicago will see rainy and cooler-than-normal weather today, with readings ranging 57-67, some 15 degrees below average. Readings will start climbing tomorrow, though temps will probably remain below-normal through to next week.
In the South, Houston will see moderately warm weather today, with readings between 72 and 90 degrees Fahrenheit, a few degrees below average. Thunderstorms are bound for today and the following few days, while temperatures will probably remain little changed. Over on the West Coast, Los Angeles will be sunny and seasonally warm today, with temperatures ranging 65-81 degrees. Starting tomorrow, readings will slowly drop to stand several degrees below average ahead of the weekend.
Technical view
According to Binary Tribune’s daily analysis, in case natural gas for settlement in August penetrates the first resistance level at $4.183 per million British thermal units, it will encounter next resistance at $4.218. If breached, upside movement will probably attempt to advance to $4.264 per mBtu.
If the energy source drops below its first resistance level at $4.102 per mBtu, it will see support at $4.056. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $4.021 per mBtu.
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