Natural gas trading outlook: futures steady on active weather

Natural gas was little changed on Wednesday after two days of sizable losses as investors weighed forecasts for cooler weather across portions of the US against the expected return of higher-than-usual temperatures.

Natural gas for delivery in September traded 0.33% higher at $2.713 per million British thermal units at 07:53 GMT, shifting in a daily range of $2.719 – $2.699. The contract slid 0.9% on Tuesday to $2.704 following a 2.6% drop on Monday.

According to NatGasWeather.com, national natural gas demand in the US will be moderate compared to normal in the next few days as an unseasonably strong weather system tracks across the Midwest, carrying heavy showers, thunderstorms and cooler than usual temperatures. The system will also push deeper into the US, bringing cooler conditions over northern Texas and parts of the South, while another stalled system keeps the far southern Texas cooler. The East will remain relatively warm as high pressure deflects the central US system back into Canada before it arrives on Thursday, which will be followed by the return of hot high pressure over the South and East through the weekend.

However, a new system will develop over the north-central regions of the country late in the weekend into Monday, NatGasWeather.com said, and its path of movement will determine weather sentiment through the end of the month. If it tracks through the northern US and exits off to Canada, widespread highs in the 90s will become established east of the Rockies, including the Great Lakes and Northeast. In case it takes a more southerly track, the pattern would become less bullish and lead to larger inventory builds.

As the week progresses, very warm to hot temperatures will once again engulf the eastern, central and southern US, with highs over Texas reaching the mid-90s to 100s, but the West will enjoy cooler-than-normal conditions as Pacific weather systems track inland.

Temperatures

According to AccuWeather.com, the high in New York today will be 86 degrees Fahrenheit, 4 above usual, with max readings set to remain near the mid-80s through the rest of the month. Chicago will max out in the upper 70s and low 80s through August 26th, followed by a slight warm-up.

Down South, readings in Houston will max out in the low-mid 90s this week and the next, compared to the usual 92-93 degrees. On the West Coast, Los Angeles will be slightly cooler than usual through August 22nd as highs reach 81-83 degrees, compared to the average 85, followed by a jump to the mid-upper 80s for the remainder of the month.

Inventories

This week’s inventory report by the Energy Information Administration is expected to show another above-average build as continued comfortable conditions across the northern US during the tracked period managed to negate the effect of very strong cooling demand over the southern half of the country. The government agency is expected to report a stockpiles gain of about 65 billion cubic feet for the week ended August 14th, the same as last week, compared to the five-year average of 54 bcf, while supplies rose by 86 bcf a year earlier.

Next week’s report, however, will likely bring a smaller-than-usual inventory build as very warm to hot temperatures across the US the past weekend and early this week offset the cooler system currently tracking across the north-central US. Supplies are projected to rise by little over 50 bcf during the week ended August 21st, below the five-year average increase of 61 bcf and the year-ago one of 77 bcf.

Last Thursday’s data showed an above-normal injection of 65 billion cubic feet for the seven days ended August 7th which brought the total gas held in US storage hubs to 2.977 trillion cubic feet, expanding a surplus over the five-year average of 2.896 trillion to 2.8% from 2.2% a week earlier.

Pivot points

According to Binary Tribune’s daily analysis, September natural gas futures’ central pivot point stands at $2.706. In case the contract penetrates the first resistance level at $2.733 per million British thermal units, it will encounter next resistance at $2.761. If breached, upside movement may attempt to advance to $2.788 per mBtu.

If the energy source drops below its S1 level at $2.678 per mBtu, it will next see support at $2.651. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.623 per mBtu.

In weekly terms, the central pivot point is at $2.839. The three key resistance levels are as follows: R1 – $2.896, R2 – $2.992, R3 – $3.049. The three key support levels are: S1 – $2.743, S2 – $2.686, S3 – $2.590.