Natural Gas Forecast: Speculators Decrease Net Short Positions on Nymex and ICE

Highlights

• Natural gas futures surge as US braces for cooler weather
• Increased LNG exports and cooler weather drive natural gas prices up
• Gas speculators reduce positions as US natural gas demand rises

Overview

Natural gas is inching lower after giving up earlier gains on Tuesday. Although the market followed through to the upside, following yesterday’s impressive short-covering rally, the price action suggests there is still a wall of resistance out there to overcome become we can truly say the trend has turned.

With front-month gas prices falling towards the $2.00/MMBtu level, it seems that short sellers are taking profits and reducing their exposure. This move may limit the extent of the downward pressure on NYMEX gas futures later in the year.

At 11:45 GMT, Natural Gas is trading $2.2305, down 0.0005 or -0.02%.

Natural Gas Futures Reach Three-Week High

On Monday, U.S. natural gas futures surged by approximately 8%, reaching a three-week peak, due to revised forecasts indicating cooler weather and higher heating demand over the next two weeks. Additionally, prices rose as the volume of natural gas being supplied to U.S. liquefied natural gas (LNG) export facilities remained on course to achieve a record high for the second consecutive month in April, following the Freeport LNG plant’s re-entry into operation in February, after an eight-month shutdown.

Net Short Positions Cut to Lowest Level Since Late March

The U.S. Commodity Futures Trading Commission’s Commitments of Traders report revealed that gas speculators decreased their net short positions in futures and options on the New York Mercantile and Intercontinental Exchanges for the sixth time in the past seven weeks. This reduction brought their positions to their lowest level since late March.

Anticipated Cooler Weather to Increase US Gas Demand and Support Market

Meteorologists have predicted that the Lower 48 states will experience below-normal temperatures from April 17-25, which is expected to shift towards normal temperatures from April 26-May 2. As the cooler weather is anticipated to persist, Refinitiv has projected that U.S. gas demand, including exports, will increase from 94.1 bcfd this week to 94.8 bcfd next week. This unexpected evaluation is currently supporting the market.

Technical Analysis

From a technical view, according to the daily chart, Natural Gas is trading below the pivot at $2.353. The technicals appear to be in favor of a downside move. Overtaking this level could extend the rally into $2.727.  A break back under the pivot at $2.353 will be a sign of weakness. This could create the downside momentum needed to challenge the first support level at $1.695.

Resistance and Support Lines:

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