Natural Gas Price Fundamental Weekly Forecast – Looking for First Storage Build of Injection Season
In This Article:
Natural gas prices closed higher last week, mostly in reaction to another weekly storage withdrawal and a tight cash market. The bulk of the rally took place prior to the release of the U.S. weekly storage report, however, Friday’s steep sell-off strongly suggests this may be old news and that the focus has now shifted to the future.
For the week, June Natural Gas futures settled at $2.771, up $0.004 or +0.14%.
Last week, natural gas extended the previous week’s upside reversal. The short-covering rally was strong enough to take out the previous weeks high. The final spike to the upside was fueled by a government report that showed a bigger-than-expected storage withdrawal.
According to the U.S. Energy Information Administration, domestic supplies of natural gas fell by 18 billion cubic feet for the week ended April 20. Traders were looking for a decrease of about 12 billion cubic feet although the estimates ranged from 9 bcf to 22 bcf. The five-year average is a build of 60 bcf.
Total stocks now stand at 1.281 trillion cubic feet, down 897 bcf from a year ago, and 527 bcf below the five-year average, the EIA said.
Forecast
Natural gas prices were pressured on Friday amid worries that this week will feature few weather-related concerns and that inventories will grow. Additionally, traders are already starting to price in a storage build.
According to natgasweather.com for the period April 27 to May 3, “One weather system will track across the Mid-Atlantic Coast today, then into the Northeast Saturday. A colder system currently over the Midwest will bring cooler than normal conditions as lows with it drop into the upper 20s and 30s. This colder system will also track across the Northeast this weekend with another round of showers and stronger than normal demand. The West will see a mix of mild and cool periods as weather systems bring showers, while the southern U.S. will be mostly comfortable with 70s and 80s, although a touch hot over SW deserts.
Next week will bring rapid warming across most of the eastern 2/3rd of the U.S. for low demand.”
Looking ahead to Thursday’s U.S. Energy Information Administration’s weekly storage report, we’re expecting the government report to show a build of about 45 billion cubic feet for the week-ending April 27.
This could help pressure prices while keeping a lid on any rallies.
The key level on the chart remains the annual pivot at $2.807. Trader reaction to this level will tell us whether the bulls or the bears are in control.
This article was originally posted on FX Empire