

Natural gas prices extended Monday's sharp rally, posting further gains during Tuesday's volatile session. Yesterday’s see saw trade was impacted by LNG gas flows hitting multiweek lows, depressed production levels and mixed weather forecasts. The July contract rose 2.8 cents to settle at at $3.722.

Production continues its downward trend this morning, coming in near a 3 month low of 102.8 BCF/day. The recent decline is partly due to seasonal pipeline maintenance and may also reflect reduced associated gas output amid a drop in oil drilling. About 37% of gas production stems from oil drilling.
Wildfires in Alberta, Canada’s largest gas producing province, may also be providing some underlying support as this could lead to a reduction in US imports.
A 6th straight triple digit build is expected in tomorrow’s storage report which would mark the longest streak of triple digit injections since 2019. With a build of 113 BCF expected, injections are set to outpace last year’s build of 94 BCF and the 5 yr avg build of 98 BCF, pushing the surplus higher. Fundamentals loosened last week with total demand down nearly 4 BCF/day while output dropped 400 MMcf/day which was offset by an increase in Canadian imports. Another larger than normal build of 98 BCF is expected for the week ending June 6.

LNG feedgas demand remains below 14 BCF/day for a 3rd straight day with demand estimated at 13.7 BCF for today. This is up from Tuesday’s 13 BCF/day and well below May’s average of 15 BCF/day.
Near term weather outlooks show large areas of below normal temps over the next 10 days with temps set to turn hotter towards the middle of the month.
Technical Analysis

The July 25 natural gas contract gained .028 on Tuesday settling at 3.722 but was unable to clear 40 day moving average resistance on the July daily chart for a 2nd day.
With resistance holding again, prices are trending lower in today’s early trade.
The lower-3.400 area which will close the gap created on Monday’s open at 3.450 is near term support.
Longer term support begins at the daily continuation chart 200 day moving average at 3.255 extending down to 3.200.
3.200 is the bottom of the gap created last week during expiration of the June 25 contract. As long as this gap remains open, it will remain a bearish technical indicator.
Weekly high resistance is at 3.764. If resistance is broken, the 3.840 high set in mid-May will become the next upside resistance.
Moving Average Alignment – Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bullish
Relative Strength Index - 55.69






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