Spot month prices extended early session gains following weekly storage data while this week’s mild weather and light demand is expected to give way to colder temps over the next several days. May futures settled 4.5 cents higher at $1.757.
Utilities injected 50 BCF of gas into storage last week which was on par with expectations but fell below both last year and the 5 yr avg comparisons, helping trim the surplus. As of Apr 12, stocks total 2.333 TCF, 622 BCF above the 5 yr avg and 424 BCF above last year. The East showed the largest build of 17 BCF followed by the Midwest where stocks rose 16 BCF.
Supply/demand fundamentals have lengthened this week with heating demand lower while output has averaged about 99 BCF/day. This is translating into estimates for a build of about 85 BCF for the week ending Apr 19. If correct, the surplus would widen back up.
After sinking to 9.1 BCF/day on Tuesday, LNG feedgas demand has been on the rise. LNG feedgas saw an advance yesterday of 0.5 BCF/day as gas flows increased across several plants. Feedgas at Freeport was on track to reach 0.3 BCF/day yesterday, after coming in near zero over the previous 7 days. As of this morning, flows are up another 0.5 BCF/day at 10.9 BCF/day.
Output is projected at 100 BCF/day this morning with Platts forecasting production to average 100.2 BCF/day over the next week.
Prices are moving slightly higher this morning given forecasts for late season cold to move into parts of the US this weekend into next week, sparking an uptick in demand.
According to the NOAA, El Nino remains in effect but conditions are ripe fading with the agency saying there’s an 85% chance of ENSO neutral conditions by the end of June. There is also a 60% chance for a transition to La Nina by summer. La Nina conditions are favored to strengthen and continue through fall and winter. This would likely result in warmer than normal temps across the South and cooler than normal conditions in the North. La Nina can also lead to a more severe hurricane season.
The May 24 natural gas contract gained 5.5 cents after the Thursday storage report to settle at $1.757 and again held above $1.649 weekly low support.
The May contract was up overnight on Middle East tensions but has given back those gains in early morning trade. It again is testing the 10-day moving average resistance at $1.780. A breakout above this level will lead to another test of the 40-day moving average at $1.850. This level also coincides with a down-sloping trendline formed from the early March and early April highs.
If moving average resistance is broken, the near term trend will turn back up with last week’s $1.943 high being the next area of resistance.
Seasonal strength should continue to come into play as now through June is historically a window when prices have the best opportunity for a sustained rally.
$1.649 extending down to $1.630 remains primary support. If broken, weekly lows at $1.481 and $1.511 will become the next downside objective.
Moving Average Alignment – Bearish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bullish
Relative Strength Index -50.62
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