Natural Gas News: EIA Storage Report Today—Bearish Continuation or Reversal?

Natural Gas Edges Higher Ahead of EIA Storage Report

May Nymex Natural Gas is slightly higher early Thursday but don’t read too much into it. Five straight losses pushed prices to a 17-month low and this looks like short-covering ahead of the EIA weekly storage report at 14:30 GMT. The fundamental picture hasn’t changed.

Technical Outlook

Technically, the trend is down as measured by three metrics, the main swing chart, a steep downtrend line and the 50-day moving average. Unless the latter is taken out with conviction, the market will remain in sell the rally mode.

Minor resistance is this week’s high at $2.723. The trend line resistance is $2.858. The main swing top is $2.888 and the 50-day moving average is $2.961. All of these levels are targets if there is a meaningful short-covering rally. The basic supply and demand fundamentals are bearish so if there is a surprise rally that catches traders off-guard, it’s likely to be fueled by oversold technical conditions.

Today, the market is straddling a previous bottom at $2.622, this week’s low is $2.561 and another multi-month bottom is at $2.514. We’re not going to try to pick a bottom, but we will be watching for a dramatic closing price reversal bottom to signal that the selling is greater than the buying at current price levels.

Storage Report Is the Only Catalyst Today

Traders are waiting on the EIA number. Expectations are for a storage injection of around 55 Bcf, well above the five-year average. If that prints, it pushes the surplus close to 100 Bcf and gives sellers another reason to lean on this market.

Bearish Fundamentals Haven’t Let Up

I keep coming back to production as the main reason I can’t get bullish here. Output is running near record highs at roughly 109.6 Bcf per day. Mild spring weather across most of the United States has kept heating demand low and let storage build. Forecasts call for above-normal temperatures through late April. LNG export flows have slipped slightly. Electricity generation is showing short-term weakness. Every demand lever is pointing the wrong way right now.

Supportive Factors Are Further Out

There are reasons to think the picture changes later in the year. Global LNG supply risks are rising. Damage to export infrastructure overseas has reduced flows to Europe and Asia. Hotter summer weather should lift cooling demand. Stronger LNG demand in the back half of the year could tighten the balance. But that’s a later story. Right now the bears are in control and the storage report will likely keep them there.

More Information in our Economic Calendar.