NatGas Firms on Potential Storage Adequacy Concerns

Natural gas futures are trading higher on Monday, inching through last week’s high as traders weighed expected production growth against worries over the ability to refill storage facilities.

At 14:25 GMT, May natural gas futures are trading $5.797, up $0.077 or +1.35%. The United States Natural Gas Fund ETF (UNG) is at $20.25, up $0.33 or +1.63%.

Key Fundamentals

EBW Analytics Group in note to clients Monday highlighted recent data pointing to an upward trend for domestic production.

“Pipeline flow monitors place the seven-day moving average 2.2-2.6 Bcf/d higher at the end of March versus the end of February – and the post-winter rebound is likely to continue in the weeks ahead,” EBW senior analyst Eli Rubin said.

However, “the continued ramp-up at Calcasieu Pass – which reached 0.8 Bcf/d this weekend – is growing total U.S. LNG export potential faster than many recognize,” Rubin said.

Short-Term Weather Outlook

According to NatGasWeather for April 4-10:  “A messy pattern to start the week as numerous weather systems impact the US, but overall mild across the northern US with highs of 40s to 60s, while nice to warm across the southern US with highs of 60s to 80s.

Warm high pressure will set up over the southern and eastern US mid-week with highs of 60s to 80s for light national demand. However, a strong spring storm with showers and thunderstorms will develop over the Midwest Wednesday – Thursday, then track into the eastern half of the US Friday – Sunday with highs of 40s to 60s for a modest increase in national demand.”

Intermediate-Term Weather Outlook

NatGasWeather wrote that “much of the weekend weather data held a rather bearish US pattern April 11-15 as most of the southern and eastern US warms into the 60s to 80s for very light national demand.

There’s potential for cooler weather systems to reach the East April 16-18 for a minor bump in national demand.

Daily Forecast

Technically, the main trend is up, but the trade through last week’s high at $5.832 failed to bring in many new buyers on the first attempt to breakout to the upside. This could be a sign that traders are reluctant to buy strength at this relatively high level, this early in the shoulder season.

Rather than buy strength, traders may be looking to re-enter longs on dips or tests of value areas. One such area is the minor pivot at $5.551. The other is a short-term retracement zone at $5.171 to $5.014.

We’re still focusing on the long side of the market because the main trend is up, Europe continues to demand Liquefied Natural Gas (LNG) and we continue to see violent daily moves in global oil and gas prices due to the ongoing war between Ukraine and Russia.

Furthermore, although U.S. production is expected to rise and weather-related demand decline, any surprise in cooling-related demand combined with steady LNG demand could send prices sharply higher.