NatGas Resumes Rally Amid Stronger Demand Outlook

Natural gas futures are trading higher on Monday after an attempt to shift momentum to the downside following Friday’s technical closing price reversal top failed to gain any traction. The move then triggered a quick rebound to a new multi-month high.

Fundamentally, cooler weekend weather trends helped strengthen the demand outlook in a market already concerned about supply availability, according to Jeremiah Shelor of Natural Gas Intelligence (NGI).

At 14:02 GMT, May natural gas futures are trading $6.537, up $0.259 or +4.13%. The United States Natural Gas Fund ETF (UNG) is at $22.80, up $0.71 or +3.21%.

Bespoke Weather Services Sees Cooler Temps on Horizon

Weather models trended cooler over the weekend, advertising stronger cooling for the eastern half of the Lower 48 over the next 10 to 12 days, according to Bespoke Weather Services.

“It appears that a warmer trend may develop toward the very end of the month, which we’d expect to persist into early May, given the continuation of the LaNina base state, something that should be a mainstay well into the summer season as well,” Bespoke said.

Could Higher Production, Dip in LNG Volumes Trigger Near-Term Correction?

The latest estimates showed production rising to around 94.5 Bcf/d, approaching year-to-date highs, according to Bespoke.

“The big question is, with production a little higher,” and liquefied natural gas (LNG) export volumes down because of ongoing maintenance, “will this be enough to turn the tide in sentiment any, and allow prices to stage a meaningful pullback?” the firm said. “That is a tough guess.”

The market may opt to wait for “proof” of looser balances from upcoming Energy Information Administration storage data, Bespoke said.

Short-Term Weather Outlook

According to NatGasWeather for April 11-17, “A mostly comfortable pattern over the eastern and southern halves of the U.S. Monday – Thursday for lighter than normal national demand due to mild to warm highs of 50s to 80s, besides locally hotter 90s Texas and cooler 40s near the Canadian border.

A chilly weather system with rain and snow will sweep across the West the next few days with lows of teens to 30s, then into the Midwest mid-week before finally spread across the East Friday – Sunday for stronger than normal national demand.”

Daily Forecast

Monday’s early price action indicates that bullish traders are still in the ‘buy the dip’ mode, which is likely to prevent a steep correction. Basically, the first sign of trouble will be a break of this pattern.

The price action also suggests traders are already pricing in the return of colder temperatures later this week and especially the April 16 – 21 period. Some forecasts are even showing that lighter national demand won’t return until April 22-25.

Meanwhile, the analysts at Tudor, Pickering, Holt & Co (TPH) “continue to see a positive risk-reward” for natural gas prices.

TPH claims that output growth “face potential downside risks given the present tightness in logistics, labor and supply chain.” This is the type of news that carry prices higher throughout the summer.