Natural gas trading outlook: futures erase weekly gains ahead of EIA data

Natural gas swung into negative weekly territory on Wednesday as forecasting agencies continued to call for a typical Spring pattern to persist over the US, with showers, thunderstorms and mostly seasonal temperatures. Government supply data is expected to show on Thursday another larger-than-average weekly inventory build.

Natural gas for delivery in May traded 0.79% lower at $2.510 per million British thermal units at 7:54 GMT, holding in a daily range of $2.533-$2.491. The contract rose 0.76% on Tuesday to $2.530. It ended flat on Monday after dropping to $2.475, the lowest since June 2012.

According to NatGasWeather.com, natural gas demand in the US will be low compared to normal through April 21st, with a slightly cooler weather trend for the eastern US over the following seven days, while the West becomes somewhat warmer.

There were no significant overnight changes in the weather outlook as an active Spring pattern continues over much of the US. The southeastern US will see heavy showers and thunderstorms over the next few days as a weather system tracks through, preventing readings from becoming too hot. As the current week progresses, mild temperatures peaking in the 60s and lower 70s will once again establish over the Great Lakes and the Ohio Valley.

Heating demand for the next two weeks will be determined mainly by two Spring storms. The first one, currently passing through the Rockies, will push into the central US and Texas on Thursday. However, it will fail to tap any truly cold Canadian air and will only bring a brief cooling to the Great Lakes and East on Friday into Saturday, NatGasWeather.com said.

A more significant storm is expected to develop late this weekend and last for most of the next workweek, impacting much of the central and eastern regions of the country with heavy showers. The system has a better chance of tapping colder Canadian air, but will also miss the frigid Arctic air pool.

Typical Spring weather patterns will keep readings across the East, South and Midwest near normal or slightly cooler next week, while the West remains dominated by high pressure, resulting in near or somewhat warmer-than-usual temperatures.

Readings

According to AccuWeather.com, readings in New York will peak at 59 degrees Fahrenheit on April 17th, 3 below usual, and will be slightly cooler than normal through the end of April. The high in Chicago will be 61 degrees today, 2 above average, with temperatures projected to cool several degrees below normal as of April 18th through the rest of the month.

Down South, Texas City will see readings max out tomorrow at 78 degrees, 2 above usual, and will remain nearby over the following seven days. On the West Coast, Los Angeles will reach 82-84 degrees through April 19th, compared to the average 73, before dropping to near-seasonal levels afterwards.

Inventories

The Energy Information Administration reported last Thursday that US natural gas stockpiles rose by 15 billion cubic feet in the week ended April 3rd, exceeding analysts’ estimates for a 10-11-bcf inventory jump. Total gas held in US storage hubs amounted to 1.476 trillion cubic feet, narrowing a deficit to the five-year average of 1.649 trillion to 10.5% from 11.5% a week earlier. Supplies were 78.9% above year-ago stockpiles levels.

This Thursday’s EIA report will probably register a slightly larger than average build, around +45 bcf, due to last week’s widespread mild conditions. The five-year average inventory gain for the week ended April 10th is +35 billion cubic feet, while supplies rose by 22 bcf during the same week a year earlier.

The following report, due out on April 23rd, will likely also reflect a larger-than-average inventory build as natural gas demand during the current week remains low. The five-year average inventory gain for the week ended April 17th is +46 billion cubic feet, while stockpiles grew by 45 bcf during the comparable period a year earlier.

Pivot points

According to Binary Tribune’s daily analysis, May natural gas futures’ central pivot point stands at $2.528. In case the contract penetrates the first resistance level at $2.554 per million British thermal units, it will encounter next resistance at $2.578. If breached, upside movement may attempt to advance to $2.604 per mBtu.

If the energy source drops below its S1 level at $2.504 per mBtu, it will next see support at $2.478. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.454 per mBtu.

In weekly terms, the central pivot point is at $2.575. The three key resistance levels are as follows: R1 – $2.645, R2 – $2.780, R3 – $2.850. The three key support levels are: S1 – $2.440, S2 – $2.370, S3 – $2.235.