Natural gas trading outlook: futures slide ahead of EIA inventory data

Natural gas fell for a second day in early European trading hours on Thursday ahead of what is expected to be another larger-than-average inventory build, while widespread warmth across the US and lower supply due to pipeline maintenance kept a floor under prices.

Natural gas for delivery in July traded 0.63% lower at $2.837 per million British thermal units at 08:14 GMT, shifting in a daily range between $2.859 and $2.827. The contract fell 1.35% yesterday to $2.855, ending two days of gains.

The Energy Information Administration is expected to report at 14:30 GMT that US natural gas inventories probably rose by 93 billion cubic feet in the week ended June 12th, compared to the five-year average inventory increase of 87 billion cubic feet, while stockpiles rose by 112 bcf a year earlier. A reading of below 90 bcf would be considered as quite bullish, and one above 95 bcf – bearish.

The government agency said last Thursday that natural gas inventories rose by 111 billion cubic feet in the week ended June 5th, well above the five-year average build of 89 bcf. Total gas held in US storage hubs amounted to 2.344 trillion cubic feet, expanding a surplus to the five-year average of 2.300 trillion to 1.9%, or 44 bcf, from 1.0% a week earlier.

Next week’s number, due out on June 25th, will likely be near normal and sound a bullish note, with early projections pointing to an inventory build of around 85 bcf for the week ended June 19th, compared to the five-year average gain of 86 bcf and the year-ago one of 110 bcf.

According to NatGasWeather.com, natural gas demand in the US will be moderate compared to normal over the next two days, followed by a jump to high afterwards, with near-normal temperatures set to engulf most of the US in the last week of June, except for a slightly-warmer West and Southeast.

Weather

What is left of tropical depression Bill will bring heavy rains and a comfortable cooling to the southern Plains over the next couple of days, with rainfall also reaching the southern Great Lakes and Ohio Valley. Meanwhile, conditions remain very warm to hot in many other US regions, with the Southeast, including Florida, driving the nation’s strongest cooling demand as highs remain in the 90s and are felt as 100s due to high humidity.

Near-record heat will occur over North and South Carolina, while the West remains very warm as well. A weak Canadian weather system will bring showers and thunderstorms over the Midwest and Northeast, capping highs to the comfortable upper 60s to lower 80s and slightly lowering readings in adjacent regions as well, before high pressure re-strengthens over much of the country during the weekend and early next week.

Active weather will continue into the last week of June as well, NatGasWeather.com said, with the eastern, western and southern US experiencing seasonal very warm temperatures. The north-central US will again be impacted by Canadian weather systems spilling cooler air that would keep temperatures near normal or slightly lower, with the data still struggling to show clearly whether high pressure will give way to cooler Canadian air to gain ground in other regions, although a more significant cooling is not expected to last long.

Readings

According to AccuWeather.com, the high in New York on June 19th will be 74 degrees Fahrenheit, 6 below usual, before jumping in the low-mid 80s afterwards. Chicago will fail to exceed 75 degrees tomorrow, 6 below usual, but highs will establish in the mid 80s during the following week.

Down South, readings in Houston will max out at 89 degrees today, near the average of 90, and will remain within a 2-3-degree range through the rest of the month. On the West Coast, Los Angeles will peak at 81 degrees today, 2 above usual, followed by a warm-up to 83-84 degrees over the next five days.

Pivot points

According to Binary Tribune’s daily analysis, July natural gas futures’ central pivot point stands at $2.883. In case the contract penetrates the first resistance level at $2.927 per million British thermal units, it will encounter next resistance at $2.999. If breached, upside movement may attempt to advance to $3.043 per mBtu.

If the energy source drops below its S1 level at $2.811 per mBtu, it will next see support at $2.767. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.695 per mBtu.

In weekly terms, the central pivot point is at $2.765. The three key resistance levels are as follows: R1 – $2.907, R2 – $3.063, R3 – $3.205. The three key support levels are: S1 – $2.609, S2 – $2.467, S3 – $2.311.