Natural gas trading outlook: futures advance on short-term warm-up, EIA data in focus

Natural gas rose on Tuesday after hovering near a 10-month low as weather forecasting agencies called for a decent warm-up across most of the US this week, but expectations for another much larger-than-average build in nationwide inventories last week limited gains.

On the New York Mercantile Exchange, natural gas futures for settlement in September traded at $3.814 per million British thermal units at 9:54 GMT, up 0.58% on the day. Prices shifted in a daily range between $3.819 and $3.780 per mBtu. The energy source fell to a daily low of $3.727 on Monday, close to July 28ths 9-month trough of $3.725, but rebounded and settled the day 0.42% higher at $3.792.

According to NatGasWeather.coms August 19th – August 25th weather forecast, a large number of warmer weather systems will track across the US this week, carrying showers and thunderstorms. They will allow temperatures over the northern US to gradually rise into the upper 70s and lower 80s, boosting nationwide cooling demand to moderate compared to normal. At the same time, the southern parts of the country will remain quite hot with highs well into the 90s spreading over the Plains and Tennessee Valley. The West will also be warm but several weather systems will track through, bringing showers and cooler-than-average readings. Despite the nationwide warm-up, there will be enough weather systems carrying cooler temperatures across the US to ensure another larger-than-average build in inventories next week.

In the August 26th – September 1st time span, NatGasWeather.com projects that a Canadian system with showers, thunderstorms and below-seasonal temperatures will pass through the central US, bringing cooling demand to lower than usual. The southern and western US remain very warm with highs well into the upper 90s and lower 100s.

The strong Canadian system is expected to push through the northern Rockies this weekend and enter the central US early next week. From there on it is not sure how far it will extend to the South, but preliminary forecasts call for a fairly deep push that will bring highs over the south-central US down to the 80s from this weeks 90s. In the Northeast and Midwest, temperatures are expected to slide to the comfortable 70s, with cooling demand falling to below-usual.

Inventories

This weeks warm-up will ensure a smaller build in US gas inventories to be reported on August 28th, but it will still come in above the average levels. Market players now eye this weeks government statistics, which are expected to show a gain of over 80 billion cubic feet, narrowing the five-year deficit by another 30 bcf, or even more.

According to AccuWeather.com, the high in New York on August 21st will be 79 degrees Fahrenheit, 3 below usual, before surging to as much as 92 degrees on August 27th. In Detroit, readings will peak at 84 degrees on August 23rd, 4 above normal, before dropping down to as much as 68 degrees on August 31st, 10 below the average.

To the South, Texas City will see temperatures maxing out at 92 degrees on August 22nd, 2 above normal, and will remain at these levels through August 26th before dropping to as much as 84 degrees Fahrenheit on August 31st, 6 below seasonal. On the West Coast, the high in Sacramento on August 21st will be 89 degrees, compared to the average of 91, and readings will remain at these levels through August 26th. A following warm-up will push readings by as much as 10 degrees, spiking at 101 degrees on August 28th and holding these levels through September 2nd.

Technical resistance and support

According to Binary Tribune’s daily analysis, September natural gas futures’ central pivot point stands at $3.781. In case the contract penetrates the first resistance level at $3.836 per million British thermal units, it will encounter next resistance at $3.879. If breached, upside movement will probably attempt to advance to $3.934 per mBtu.

If the energy source drops below its first support level at $3.738 per mBtu, it will see support at $3.683. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.640 per mBtu.