Natural gas trading outlook: futures head for sizable weekly gain, big gains for US inventories

June 6, 2014 8:53 am

Natural gas futures traded higher during early hours in Europe today. Yesterday the US Energy Information Administration (EIA) reported a huge increase in natural gas storage levels. However, blue fuel contracts actually closed higher, as inventories are still well-below average, ahead of rising power demand in summer.

Front month natural gas futures, due in July, added 0.43% at the New York Mercantile Exchange to trade for $4.721 per million British thermal units at 8:51 GMT. Prices ranged from $4.700 to $4.725 per mBtu, reaching a monthly high. Yesterday the contract added 1.31%, and so far for the week the blue fuel has gained about 3.5%.

The EIA weekly natural gas inventories report for the week through May 30 was released yesterday. The log revealed a 119 billion cubic feet (bcf), beating expectations of 116 bcf increase. The injection is the biggest stockpiles had received since June 2009. Stockpiles levels remain 33% below the reading from the previous year, but gradually recover.

Last week a further huge gain of 114 bcf was logged, setting the tone for more record yields throughout the summer, as suggested by the EIA.

However, as summer season sets in and temperatures rise, air conditioning will become more intense, pushing up power demand, which could hurt natgas supplies and support price levels.

“As we get into June, cooling demand begins to pick up,” said for Bloomberg Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “Even with the robust stock injections, the market is concerned that we are very shortly going to pass the peak of our injection season and that isn’t going to be enough.”

US weather report

According to AccuWeather.com, New York is set for sunny, normal day, with temperatures ranging 62-78 degrees Fahrenheit. Tomorrow readings will climb several degrees, accompanied by more sunny and pleasant weather over the weekend, pushing highs into the mid 80s.

Boston will be quite sunny today, with normal temperatures, ranging 60-75. Over the weekend a very sunny and pleasant weather is expected to push readings up to 10 degrees above normal, with highs in the low-to-mid 80s.

Chicago is set for a sunny and pleasant day, with temperatures ranging 60-75. Tomorrow readings will climb a few degrees, though an afternoon thunderstorm is quite possible. Sunday will bring mostly sunny weather, though readings will plummet almost 10 degrees.

Over on the West Coast, Los Angeles will have normal temperatures today and tomorrow, with highs in the upper 70s and lows about 60, before a warm up on Sunday and into next week drags readings up to several above average. Up North, Seattle will be quite sunny and warm today, temps between 52 and 73. The weekend will be similar, mostly sunny and warm.

Technical view

According to Binary Tribune’s daily analysis, in case natural gas for settlement in July penetrates the first resistance level at $4.754 per million British thermal units, it will encounter next resistance at $4.807. If breached, upside movement will probably attempt to advance to $4.891 per mBtu.

If the energy source drops below its first resistance level at $4.617 per mBtu, it will see support at $4.533. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $4.480 per mBtu.

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