Natural Gas Monthly Forecast – May 2017

Natural gas prices were pretty much stable for the whole of the month as there was not any specific fundamental push in any direction for the bulls or the bears to feed on and push the price in a specific direction. We had mentioned the same in our forecast for last month as we could not see any fundamentals that could move the prices in any specific direction and we had mentioned that we are looking into a consolidation and ranging phase in the month of April and thats what we got as well.

Natural Gas Prices Consolidate

The winter months are those when the natural gas prices tend to rise during any specific year and this is due to the fact that a lot of gas is required for heating purposes in the US and other parts of North America. The industry demand for natural gas tends to be stable through the course of the year and hence, gas remains the only commodity whose prices depend a great deal on the season that we are in. That is why it is a bit easier to trade natural gas than most of the other commodities.

For the month of April, we saw a tapering of the demand for gas across the global markets. This is again a seasonal phenomena as the month of April and May are called the shoulder months due to the dip in the demand for gas. The demand for heating is no longer there as winter is gone by then in most parts of the world and the demand for heating is also not there as it is yet to be the summer season as well. As a result of this, we are caught in the middle as far as the months of April and May and that is why we could confidently say in our forecasts in March that we are in a period of consolidation and ranging for the next couple of months.

We did see the same in the month of April and traders should be ready for the same in May as well. Though there is a drop in demand, we would have normally expected the prices to fall as a result of this but we have not seen this and on the contrary, we are seeing the prices hold steady for the month. The reason for this is the fact that the production of gas has also fallen across the markets in tandem with the fall in demand. This is something that can be expected in such markets as there would be no use in maintaining the production at high levels when there is no demand for the same. So, this fall in production along with the fall in demand has helped to hold the natural gas prices steady in March.

Looking ahead to the coming month, May is also a shoulder month and expect some more consolidation and ranging as well. Technically, we expect the prices to hold between 3.38 and 3.10 for the month of May and this action is likely to be similar to what we saw in April. Fundamentally also, we support this price range to hold in the month of May as we do not expect much changes in the demand or supply during the course of the month and hence, we are looking at some more consolidation and ranging.