Natural Gas Futures Rise Ahead of Weekly Storage Report

Key Takeaways

• Natural gas futures rise after previous session’s decline fueled by position-squaring
• Weekly government storage report due to be released, analysts expecting a steep pull
• Spring weather expectations and high production levels result in a decrease in demand
• US Lower 48 states to experience slightly below average temperatures, followed by benign spring weather next month

Overview

Natural gas futures are edging higher early Thursday after a steep decline the previous session. The move is likely being fueled by position-squaring ahead of today’s weekly government storage report, due to be released at 14:30 GMT. Analysts are anticipating a relatively steep pull that that would reflect a brief but notable blast of snow and cold last week.

At 05:03 GMT, May natural gas futures are trading $2.351, up 0.044 or +1.91%. On Wednesday, the United States Natural Gas Fund ETF (UNG) settled at $7.37, down $0.36 or -4.66%.

Natural Gas Futures Drop Again on Spring Weather Expectations and High Production Levels

Natural gas futures decreased for the third time in four sessions on Wednesday, as the market is expecting milder spring weather and high levels of natural gas production. This resulted in a decline in demand, despite a record high gas flow to liquefied natural gas (LNG) export plants.

Prices also dropped despite forecasts of cooler weather and higher heating demand, as the impact of slightly colder weather in late March on heating demand is much less significant than colder weather in late January.

US Lower 48 States to Experience Below Average Temperatures, Followed by Benign Spring Weather Next Month

According to weather forecasts, the US Lower 48 states will experience slightly below average temperatures over the next two weeks. High pressure will bring warm weather from Texas to the Northeast.

Although cool to cold weather systems will result in moderate demand this weekend and slightly stronger demand next week, benign spring weather is anticipated in April.

An analyst from Rystad Energy suggests that the growing natural gas supply may not be balanced out by the lower demand as winter comes to a close.

Daily May Natural Gas Technical Analysis

The main trend is down according to the daily swing chart. A trade through $2.493 will confirm Tuesday’s closing price reversal bottom and shift momentum to the upside.

A move through $2.240 will negate the chart pattern and signal a resumption of the downtrend. A move through $2.789 will change the main trend to up.

The minor range is $2.789 to $2.240. Its pivot at $2.515 is the next upside target and potential resistance.

Daily May Natural Gas technical Forecast

Trader reaction to $2.370 is likely to determine the direction of the May natural gas futures contract on Thursday.

Bearish Scenario

A sustained move under $2.360 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into $2.240. This is a potential trigger point for an acceleration to the downside.

Bullish Scenario

A sustained move over $2.370 will signal the presence of buyers. If this generates enough upside momentum then look for a possible surge into $2.515.