By: Heather Wine, Senior Risk Manager - Energy
4-Year price deciles
Nat gas rose 6% Monday on forecasts for stronger shoulder season heating demand amid cooler near term forecasts. May futures settled 36.5 cents higher at $6.643. European prices once again held steady.
Forecasts have trended colder since last Friday with cold Canadian air expected to reach the US next week. The next 2 weeks will see a total of 183 HDDs which is above the 10 and 30 yr norms.
The 6-10 day period is expected to see below normal readings across much of the US with the exception of the SW. The upper Midwest has the strongest probability for cooler temps.
The 8-14 day period is expected to see a continuation of these below normal readings.
Cooler weather this month will keep heating demand strong enough to prevent utilities from adding much gas into storage. US storage levels are currently about 17% lower than the 5 yr avg. Early forecasts for this week’s storage report suggest a build of 16 BCF for the week ended Apr 8. This compares to last year’s build of 55 BCF and the 5 yr avg build of 33 BCF.
Prices have pulled back from earlier morning gains of more than 2% and are currently trading a few cents higher on the day.
The May 22 natural gas contract remains in a parabolic rally higher closing up 4 consecutive weeks while adding another .365 or 5.8% on Monday to settle the day at 6.643.
There is no sign of a top forming although daily volume continues to spike which is a technical feature typically seen near market highs or lows.
Recent price action and the surge in daily volume could be the final capitulation of short interest in the market before a reversal finally occurs.
10 day moving average support is at 6.065 today, nearly .600 under yesterday’s close and indicative of a very overbought market.
But the trend at this point remains up with the current overnight high at 6.843 being near term resistance followed by the late-January 7.346 high.
Technical Indicators:
Moving Average Alignment – Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Following Index – Bullish
Relative Strength Index – 78.48
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