Natural gas trading outlook: futures swing amid active weather

Natural gas swung between gains and losses on Tuesday as forecasts calling for cooler-than-usual weather over the central and eastern US lent some support, but the lack of near-freeze temperatures kept gains in check.

Natural gas futures for settlement in November was up 0.08% at $3.919 per million British thermal units by 11:34 GMT on the New York Mercantile Exchange. Prices held in a daily range of $3.933 and $3.902. The power-station fuel added 1.5% on Monday to $3.916 per mBtu, having fallen 4.5% last week.

According to NatGasWeather.com, natural gas demand over the next seven days will be moderate compared to normal. The eastern parts of the country will enjoy mild weather today with temperatures reaching into the upper 70s. The far southern US will remain warmer than usual throughout the week, stoking late season cooling demand for the energy source.

However, a strong weather system will trek across the central and eastern US over the next several days, bringing showers, thunderstorms and below-seasonal readings. After the mercury drops tomorrow, additional reinforcing cool blasts will push overnight lows into the 40s and 30s on Friday and during the weekend, inducing modest heating demand. Nevertheless, those weather systems will not be significant enough to bring widespread and consistent freezing temperatures, leaving the markets supported, but also unable to advance much.

Next week, numerous weather systems with showers, thunderstorms and slightly lower-than-usual temperatures will track across the Midwest and Northeast, and will also push deep into the Southeast. The southern US will continue to gradually cool, with the until-recently widespread highs in the 80s and 90s becoming rarer, easing the need for cooling. Both the southern and western parts of the country will remain near or little above average.

According to AccuWeather.com, the low in New York on Thursday will be 60 degrees Fahrenheit, 10 above usual, before falling to 47 on October 21st, and further down to 38 degrees two days later. Chicago will drop to 48 degrees on Friday, 3 above average, before sliding further to 39 degrees on October 23rd, 5 below normal.

Down South, the high in Houston between October 16th-18th will be 85 degrees Fahrenheit, 4 above seasonal, before dropping to 71 degrees on October 22nd-23rd. On the West Coast, readings will peak at 75-76 degrees on Thursday, 3 below seasonal, and are projected to hold around that level through October 22nd after which a warm-up will boost highs into the mid-80s for 5 days.

Supply data

Prices slid to the lowest in a month on Thursday after the Energy Information Administration reported that US natural gas inventories rose by 105 billion cubic feet (bcf) in the week ended October 3rd, largely in line with analysts’ expectations for a jump by 105-110 bcf. This was the 25th straight weekly above-average build.

This week’s supply data is projected to show a build of around 90 billion cubic feet, compared to the five-year average of 78 billion. If confirmed, this would be the closest net injection to the average since April. Near-term builds are expected to keep narrowing the deficit as average weekly injections begin to decrease after this weeks shoulder season peak.

“We expect gradual gains on builds to continue playing out into early November where weather patterns are marginally cool over the Midwest and Northeast, but far from cold,” analysts at NatGasWeather.com said in a note.

The Energy Information Administration said in its Short-Term Energy Outlook report dated October 7th that it expects supplies to reach 3.532 trillion cubic feet by the end of October, still the lowest for this time of the year in six years.

Pivot points

According to Binary Tribune’s daily analysis, November natural gas futures’ central pivot point stands at $3.888. In case the contract penetrates the first resistance level at $3.955 per million British thermal units, it will encounter next resistance at $3.995. If breached, upside movement may attempt to advance to $4.062 per mBtu.

If the energy source drops below its first support level at $3.848 per mBtu, it will next see support at $3.781. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.741 per mBtu.

In weekly terms, the central pivot point is at $3.891. The three key resistance levels are as follows: R1 – $3.968, R2 – $4.076, R3 – $4.153. The three key support levels are: S1 – $3.783, S2 – $3.706, S3 – $3.598.