Natural gas trading outlook: futures hold near 11-month low ahead of supply data

Natural gas was steady near the lowest level since November ahead of EIA supply data that is expected to show the 27th straight above-average weekly build in US stockpiles. Weather forecasts continued to show mostly warmer-than-seasonal weather across the US throughout October, with focus now shifted toward patterns in early-November that could potentially bring widespread freezes.

November natural gas futures fell 0.11% to $3.707 per million British thermal units by 10:14 GMT in New York, having shifted in a daily range between $3.712 and $3.685 per mBtu. The contract rose 1.1% on Tuesday to $3.711, its first jump in six days, after it earlier fell to an intraday low of $3.631, the lowest since November 20th. Prices are down ~1.5% so far this week.

The Energy Information Administration reported last Thursday that US natural gas inventories rose by 94 billion cubic feet (bcf) in the seven days through October 10th, exceeding analysts’ projections for a build in the range of 89-92 bcf and the five-year average gain of 78 billion. This was the 26th consecutive above-average weekly build.

Total gas held in US storage stood at 3.299 trillion cubic feet, narrowing the deficit to the five-year average to 9.9%, down from 10.5% a week earlier, and also shrinking the gap to last year’s 3.643 trillion to 9.4%, from 10.1% during the preceding week.

Due to last week’s mostly seasonal and in some regions above-normal temperatures, analysts’ expectations for the build due to be reported on October 23rd ranged between 95 and 98 billion cubic feet, well above the five-year average net injection of 70 billion cubic feet. A triple-digit build would be considered strongly bearish, while a net injection of 90 bcf and below – the opposite.

The EIA said in its Short-Term Energy Outlook dated October 7th that inventories may rise to 3.532 trillion cubic feet by the end of the month, the lowest for this time of the year in six years. Marketed gas production is expected to jump 5.4% this year to 73.98 bcf per day, the biggest percentage increase and also volume since 2011.

US weather

Prices also remained pressured to the downside as weather models offered nothing new to Octobers forecast, having previously shown widespread mild weather that would pave the way for additional above-average inventory builds.

According to NatGasWeather.com, natural gas demand over the next seven days will be low-to-moderate compared to normal, with the 8-14-day outlook shifting trend to slightly cooler, compared to the preceding neutral estimate.

The Northeast will see showers and slightly cooler-than-usual readings today as the previously reported slow moving weather system tracks across the region, moving east. The central and eastern US will enjoy above-seasonal temperatures this weekend before additional weather systems arrive next week.

Readings over the central and southern US are also expected to be mild, with highs into the 60s and 70s, and 80s for the South.

Additional weather systems will push lows across the northern US to the 40s and 30s in the middle of next week, locally below freezing, but widespread freezes will still not be present, limiting heating demand.

Market players attention remained pointed at developments in early-November that have the potential to finally move the market away from the recent price range. Much colder weather systems may introduce light snowfall and widespread below freezing temperatures to the North after November 1st. The southern parts of the country are also expected to turn colder.

Readings

According to AccuWeather.com, readings in New York on October 23rd will range between 52 and 58 degrees Fahrenheit, compared to the average of 48-61, before jumping to 53-69 five days later. Chicago will range between 49 and 64 degrees on October 25th, above the average of 43-59, and will enjoy little-above-seasonal readings at 45-58 on October 30th.

Down South, highs in Texas city through October 29th will range between 80 and 83 degrees, compared to the average of 78-79, before cooling down to the seasonal mid-70s in early November. On the West Coast, Los Angeles will reach 84 degrees on October 24th, 6 above usual, before the mercury drops to the seasonal mid and upper 70s as of October 26th.

Pivot points

According to Binary Tribune’s daily analysis, November natural gas futures’ central pivot point stands at $3.686. In case the contract penetrates the first resistance level at $3.741 per million British thermal units, it will encounter next resistance $3.771. If breached, upside movement may attempt to advance to $3.826 per mBtu.

If the energy source falls below S1 at $3.656 per mBtu, it will next see support at $3.601. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.571 per mBtu.