Natural gas prices settled higher Thursday with gains accelerating following a unexpected late release of storage data. While storage data aligned with the average estimate, the market responded bullishly as the build came in on the low end of the forecast range. Further support stemmed from bullish technicals and seasonal buying ahead of what is likely to be a hot summer. June futures settled 15.3 cents higher at $3.479.
A delayed storage report revealed stocks rose 107 BCF in the week ended Apr 25, leaving total gas in storage at 2.041 TCF. Following a 13 week deficit, the build flipped stocks into a surplus of 5 BCF vs the 5 yr avg. Compared to last year, stocks stand at a deficit of 435 BCF. Storage data was released 3.5 hours late as the EIA’s commercial cloud services provider experienced a widespread service disruption. No further issues are expected. Estimates for next week’s report currently range from a build of 97 BCF to 112 BCF.
Weather demand over the next 2 weeks should remain light overall. The Midwest is expected to see a cold front this weekend that will slowly make its way towards the East Coast next week. This could temporarily boost heating demand. Cooling needs however will be lighter than normal as below normal temps dominate the South. TDDs over the next 15 days are estimated at 98.4, which ranks as 4th lowest. For the month of May, Weather Desk is projecting a total of 125 CDDs, higher than both the 10 and 30 yr norms while 107 HDDs are expected which is lower than the 10 and 30 yr norms.
Platts did revise Thursday’s production higher by 0.6 BCF/day to 104 BCF/day. Production for Friday is currently estimated at 105.3 BCF/day. Output should recover back towards 106 BCF/day over the next 2 weeks. Feedgas demand is unchanged from yesterday at 15.5 BCF/day.
Upward momentum continues this morning as technicals remain bullish while EU prices are stronger as supplies there are only 40% full versus the norm of 50% for this time of year.
The US injection pace is expected to remain robust over the next few weeks which may keep a lid on prices.
Technical Analysis
Thursday saw the June contract trade back above Tuesday’s high of $3.457, settling at $3.479 up .153 cents. Since last Friday’s close on prompt-month futures, the market is up .542 cents or 18%!
The back and fill discussed this week failed to see the June contract fill the bottom of the gap at $3.187. Closing above the recent high at $3.457 is confirmation that the downside possibility of filling that gap is done for now.
Volume has increased by 50,000 contracts since expiration and open interest has increased by 30,000 contracts over the past week, another bullish sign.
Resistance for June now sits the April 14th high of $3.613 followed by the 40-day moving average at $3.730. Support is yesterday’s low of $3.340 and the previous high at $3.457. A settle below $3.340 would set up a possible test of the 10-day moving average at $3.150 and the 200-day moving average at $3.100.
Seasonal strength from a 4 -year historical perspective continues for the next five weeks before a weaker July. The recent price break saw near-term futures in the 30th and 40th decile.
Friday’s Commitment of Trader’s report will give the market a better indication of whether spec funds lightened or added to their net long position.
Moving Average Alignment – Bullish
Long Term Trend Following Index – Bearish
Short Term Trend Follow Following Index - Bearish
Relative Strength Index -46.17
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