Natural Gas Fundamental Analysis, March 30, 2017

Natural gas futures surged on Wednesday to its highest level since February 10. The market continues to claw through retracement levels that are trying to act like resistance, but the upside momentum is building and threating to challenge the last top before the sell-off into the late February bottom. This top is $3.311. The next resistance level target jumps to $3.507.

May Natural Gas futures closed at $3.231, up $0.054 or +1.70%.

Forecast

For a third straight session, we, along with other professional traders are going to be monitoring shifting early-spring weather forecasts because they are the current catalysts behind this unexpected early spring rally.

According to natgasweather.com, weather systems will track across the country the next several days with rain, snow, and thunderstorms, but with limited cold air. The southern U.S. remains quite warm. Demand will increase Thursday through Saturday as a chilly system arrives over the Northeast, with milder ones over the West and Texas. Demand will drop back to below normal Sunday through Wednesday as mild conditions return to the North and East.

Speculative buying seems to be strong enough to drive out stubborn short-sellers who have been left with the task of defending the early February tops. The specs are watching a potential cold system earmarked for April 7 through the 10^th.

Looking ahead to Thursday’s government storage report, traders expect to see a draw of 37 billion cubic feet for the week-ended March 24.

During the preceding week, we saw a draw of 150 billion cubic feet, a decline of 25 billion a year earlier and a five-year average drop of 27 billion cubic feet.

As of March 24, total natural gas in storage stood at 2.092 trillion cubic feet, according to the U.S. Energy Information Administration. This is also 16% lower than levels at this time a year ago but 12.7% above the five-year average for this time of year.

On the chart, the key level to watch is $3.311. There may be a boatload of buy stops over this level.  If speculative buyers come in and drive through this top then combined with the buy stops, we could be setting up for a huge spike to the upside.