Natural Gas Price Fundamental Weekly Forecast – Late Season Draw Spooking Weaker Shorts

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James Hyerczyk

Updated Sun, Apr 15, 2018, 3:33 AM

Natural gas futures finished the week higher as speculative buyers generated enough upside momentum to spook a few of the weaker short-sellers out of the market. Relatively low prices and a possible delay in the start of the injection season encouraged specs to buy weakness last week after the market touched its lowest level since February 15.

For the week, June Natural Gas futures settled at $2.764, up $0.017 or +0.62%.

Another reason for the buying was a weekly government report which showed a bigger-than-expected storage draw.

According to the U.S. Energy Information Administration, natural gas storage in the U.S. fell by 19 billion cubic feet in the week ended April 6, compared to forecasts for a decline of 11 billion.

Thursday’s data compared with a draw of 29 billion cubic feet (bcf) in the preceding week and represented a decline of 725 billion from a year earlier and was also 375 bcf below the five-year average.

Total U.S. natural gas storage stood at 1.335 trillion cubic feet, 35.2% lower than levels at this time a year ago and also 21.9% below the five-year average for this time of year.

Forecast

We’re looking at the possibility of two-sided price action this week as winter continues to linger in several key demand areas. This is likely to produce another drawdown in storage during a time when inventories should be rising.

The near-term price action is likely to mirror the two-sided weather forecast. Despite this short-term development, traders remain confident that rising production, milder temperatures and lower demand will keep a lid on all rallies.

Furthermore, despite storage being 21.9% below the five-year average for this time of year, bearish short-sellers believe that once the cold weather goes away, this shortfall should be filled rather quickly.

Looking ahead to the EIA storage report on Thursday, traders are expecting a 25 Bcf storage draw for the week-ending April 13. That compares with plus 54 Bcf last year and plus 38 Bcf for the five-year average.

This article was originally posted on FX Empire