Source: Binary Tribune

Natural Gas - Commodities TradingNatural gas futures were lower during midday trade in Europe today, after climbing more than 4% last week on widespread heat in the US. Weather patterns suggest largely average weather for the US, though this week’s natgas inventories build is set to be the leanest for the summer season.

Front-month natural gas futures for delivery in October traded at $4.051 per million British thermal units (mBtu), down 0.37%, at 11:59 GMT on the NYMEX. Prices ranged from $4.035 to $4.061 per mBtu. The contract added ~4.3% last week.

The US Energy Information Administration (EIA) report from last Thursday, which covers the week through August 22, logged an injection of 75 billion cubic feet, the smallest weekly build since early May, though continuing the larger-than-average builds series for the nineteenth week. Storage levels were reported at 2 630 trillion cubic feet, just 16.5% short of the 5-year average, and are headed for a near-complete replenishment ahead of winter heating season.

“There’s been enough extremely hot weather in gas-consuming states to throttle back those significant injections,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. “The bearish factor is we are progressing into the fall season, so the threat of heat to run up electric power generation is going to start to diminish.”

Next week’s build is also expected to be leaner, as several days of warm temps over the northern US drive fairly strong cooling demand.

High temperatures in the summer generally prompt increased cooling demand, which in term bumps up overall natural gas consumption, as 30% of all US natgas is burned in power stations, generating electricity for air conditioners, among all other things.

US weather outlook

The Northeast will see severe thunderstorms today, as temperature highs climb to the balmy upper 80s. The Midwest is set for scattered thunderstorms and showers, as temps hover near seasonal readings. The southern states will also see some thunderstorms along with muggy highs in the 90s.

New York is set for a warm day, according to AccuWeather.com, with temps ranging 73-85 degrees Fahrenheit, several above average. A strong afternoon thunderstorm will pop up, which could ruin a Labor Day picnic. Tomorrow readings will climb to some 10 above normal, before dropping back to highs in the mid 80s for the rest of the week. Chicago is set for a stormy Labor Day, with seasonal temperatures at 67-80. Temps will largely stay withing a few degrees of the average for the rest of the leek, with mostly sunny weather.

Down South, Houston will have a quite boring week, with seasonal temps at 77-90 and a few PM thunderstorms through to Friday. Over on the West Coast, Los Angeles starts the week off with a normal, sunny day, readings between 66 and 86 Fahrenheit. Temps will slowly drop over the week to stand several degrees below average on Thursday.

Technical support and resistance levels

According to Binary Tribune’s daily analysis, October natural gas futures’ central pivot point stands at $4.054. In case the contract penetrates the first resistance level at $4.096 per million British thermal units, it will encounter next resistance at $4.127. If breached, upside movement will probably attempt to advance to $4.169 per mBtu.

If the energy source drops below its first support level at $4.023 per mBtu, it will next see support at $3.981. If the second key support zone is breached, the power-station fuel’s downward movement may extend to $3.950 per mBtu.

Gary Beal