The spot month contract reversed some of its recent gains yesterday given unsupportive weather and bearish storage injection estimates. The market is also starting to factor in summer weather which is currently forecast to be hotter than normal across most of the country. June futures settled 6 cents lower at $3.326.
A build of 107 BCF is expected for the week ended Apr 25, which compares bearishly to last year’s build of 64 BCF and the 5 yr avg build of 58 BCF. If correct, stocks would reverse into a surplus for the first time since mid-January. The supply/demand balance loosened significantly last week, allowing for the season’s first triple digit injection. Led by a drop in heating demand, total usage fell 4.7 BCF/day last week while gas output pulled back from recent highs by about 1.2 BCF/day. Overall, the market lengthened by 3.5 BCF/day. Early estimates for the week in progress call for a build of 99 BCF.
The May outlook from Weather Desk was revised warmer across the North and cooler across the South, resulting in a loss of 25 HDDs and 10 CDDs. The HDD forecast ranks 4th lowest while the CDD outlook falls between the 10 and 30 yr norms. Their June outlook remains unchanged with above normal readings from the West to the Central US and East Coast with hotter conditions expected from the Interior West to the Plains. A total of 275 CDDs are forecast, which ranks 9th hottest.
LNG feedgas demand has been strong this week averaging just under 16 BCF/day over the past 6 days. Platts is showing feedgas demand down 0.5 BCF/day this morning at 15.5 BCF/day. Flows could see a downturn over the coming weeks amid seasonal declines in plant throughput.
Prices are trading higher this morning as production is coming in 2.2 BCF/day lower at 103.4 BCF/day.
Technical Analysis
Yesterday’s price action saw the June future’s contract back and fill part of the gap created by the May expiration on Monday. June futures settled at $3.326, down .06 cents. Yesterday’s low at $3.260 also traded into the gap between $3.187 - $3.307 set on Tuesday.
This gap between $3.307 - $3.187 is important because if the market does not trade lower and fill the gap this week (June down to $3.187 or lower), that is another sign of more long-lasting low. Open interest has increased by 30,000 contracts over the past week, another bullish sign.
Resistance for June now sits at Tuesday’s high of $3.457 and the April 14th high of $3.613. Support is yesterday’s low of $3.260 as well as the 10-day moving average at $3.130 and the 200-day moving average at $3.090.
Seasonal strength from a 4 -year historical perspective continues for the next five weeks before a weaker July. Prices after that tend to move higher into September.
The recent price break saw near-term futures in the 30th and 40th decile. The Short-Term Trend Following Index crossed UP on Wednesday while the Long-Term Trend is turning as well.
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
This material should be construed as the solicitation of an account, order, and/or services provided by the FCM Division of StoneX Financial Inc. (“SFI”) (NFA ID: 0476094) or StoneX Markets LLC (“SXM”) (NFA ID: 0449652) and represents the opinions and viewpoints of the author. It does not constitute an individualized recommendation or take into account the particular trading objectives, financial situations, or needs of individual customers. Additionally, this material should not be construed as research material. The trading of derivatives such as futures, options, and over-the-counter (OTC) products or “swaps” may not be suitable for all investors. Derivatives trading involves substantial risk of loss, and you should fully understand the risks prior to trading. Past results are not necessarily indicative of future results.
All references to and discussion of OTC products or swaps are made solely on behalf of SXM. All references to futures and options on futures trading are made solely on behalf of SFI. SXM products are intended to be traded only by individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM.
SFI and SXM are not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. Contact designated personnel from SFI or SXM for specific trading advice to meet your trading preferences.
(1) The StoneX Commodity Indicator provides an overall view of market sentiment for a commodity based on the quantification of fundamental, technical and historical market data related to that commodity. The StoneX Commodity Indicator History graphically represents each day’s actual very bearish to very bullish signal. This history contains the sum of all factors, excluding weather forecasts.
(2) The StoneX Value Matrix provides a measure of historical value by analyzing historical price data distributed into 10 deciles. The prices are adjusted for inflation using the Producer Price Index (PPI) published by the U.S. Bureau of Labor Statistics.
Reproduction or use in any format without authorization is forbidden. © Copyright 2024. All rights reserved.
