Natural Gas Fundamental Analysis, Week of April 24, 2017

Natural gas futures finished the week by posting its biggest weekly loss in two months as technically-based traders took out a key support level, leading to an acceleration to the downside into the close.

June Natural Gas futures finished the week at $3.192, down 0.115 or -3.48%.

After winter finally arrived to drive prices higher in March, natural gas reached a high on April 5 at $3.422 and never looked back, trending sideways to lower before finally trading through the low from April 4 at $3.198 that had been propping the market up most of the week. The catalyst behind the selling pressure this month has been the return of mild, spring-like temperatures.

In other news, according to the U.S. Energy Information Administration, natural gas stockpiles grew by 54 billion cubic feet in the week ended April 14, compared with the 49 Bcf expected by forecasters surveyed by The Wall Street Journal. Analysts polled by S&P Global Platts expected an increase of between 47 billion and 51 Bcf.

Total stocks now stand at 2.115 trillion cubic feet, down 368 Bcf from a year ago, but 282 Bcf above the five-year average, the government report showed.

On Friday, oil-field services company Baker Hughes, Inc. said that U.S. producers added another five gas rigs to their working fleet, which has more than doubled to 167 from last year’s historic lows.

Forecast

The price action late in the week suggests that sellers have taken control of the market. Further selling pressure this week is likely to drive the market into a key technical support zone at $3.120 to $3.048.

The short-term picture is bearish because of expectations of low demand. This is normal for this time of year because it’s not cold enough for heating needs and it’s not hot enough for air-conditioning usage in key demand areas.

If we don’t get seasonal demand in the near-term then combined with increased production, we could see an extension of the selling pressure this week.

The longer-term picture is likely to be a little more bullish because of increased seasonal demand and rising exports. According to early weather reports, this summer we could see record heat which would lead to increased air-conditioning usage and greater demand for natural gas from power plants.