June NatGas: Buyers Eyeing $6.762 – $6.423 Support Zone

Natural gas futures are trading lower on Wednesday as traders prepared for another round of heightened volatility following Monday’s surge to a 13-year high and yesterday’s steep sell-off.

Ahead of today’s opening, Bespoke Weather Services cautioned in a note to clients that it would continue to expect “extreme volatility” for some time, with prices remaining subject to large swings either way even absent “material changes” in underlying fundamentals indicators.

At 13:25 GMT, June natural gas futures are trading $7.264, down $0.013 or -0.18%. On Tuesday, the United States Natural Gas Fund ETF (UNG) settled at $24.98, down $2.15 or -7.92%.

Bespoke went on to add, “Today’s data does have a bit of a bullish tilt, from higher weather demand to another production dip back under 94 Bcf/d,” Bespoke said. “Our best guess remains that yesterday’s large sell-off was a much-needed breather, with longs taking some profits, allowing for the pullback.”

This suggests that “until production shows up more convincingly, the risk of higher prices is still alive and well, with an ultimate move back over the $8.00 level still very much in play, the firm added.

Short-Term Weather Outlook

NatGasWeather said before the opening that overnight weather data showed a heating degree day increase from the American model.

Natural Gas Intelligence (NGI) reported that NatGasWeather said the pattern remained “cold enough to satisfy for a bullish lean” between next Tuesday and May 3, with “chilly late-season weather systems” expected to move over the northern Lower 48, delivering lows in the 30s.

Overall, the pattern should generate enough weather-driven demand through early May to keep the year-on-five-year average inventory deficit “near to slightly larger than minus 300 Bcf,” the firm added.

US Energy Information Administration (EIA) Weekly Storage Report

According to NGI, Thursday’s EIA weekly storage report is expected to show a 40 Bcf injection for the week-ending April 15. In the year-earlier period, EIA recorded a 42 Bcf build, while the five-year average is also a 42 Bcf injection.

Daily Forecast

The price action this week indicates natural gas is in a weather market. This opens up the possibility of extreme volatility with the short-term forecasts changing nearly every day this week.

Technically, the main trend is up and it’s going to take a lot of selling pressure to change the trend to down. However, there is still room to the downside before the market reaches a value area attractive enough to encourage new buying.

The short-term range is $5.326 to $8.197. If the selling resumes today then look for a pullback into its retracement zone at $6.762 to $6.423. This is a value area so look for buyers to return on the first test of this area.