Natural Gas News: Futures Try to Recover as Global Risk Meets Mild Weather

Natural Gas Edges Higher as Iran Tensions Add Risk Premium to Global Energy Markets

May Nymex Natural Gas futures are edging higher early Monday as renewed U.S.-Iran tensions added a risk premium to global energy markets. The weekend talks collapsed and the naval blockade announcement raised immediate concerns about Strait of Hormuz shipping routes for both LNG and oil flows. That geopolitical bid is lifting prices even though the domestic picture hasn’t changed.

Technical Outlook

After three days down and a test of a multi-level support area, May Natural Gas futures may be setting up for a meaningful short-covering rally. The first potential target is a minor pivot at $2.758. Regaining the January bottom at $2.689 is another indication that the selling exhausted, following Friday’s low at $2.628.

Determining the first upside objective is just simple math. Predicting whether the trend will change to up and how long it will last is a little more complicated because there are numerous resistance points that need to be overcome.

A trade through the recent swing top at $2.888 will shift momentum to the upside, but anyone buying strength on that move will face a headwind in the form of a 2-month trend line at $2.925. If the buying is strong enough to take out the trend line then the rally is likely to extend into the 50-day moving average at $3.014.

Trader reaction to the 50-day MA could determine the direction into contract expiration so we’ll be watching a test of this level closely. But right now, the focus will have to be on whether this market can muster more than just the usual 50% retracement of the swing from $2.888 to $2.628.

Global Dynamics Driving the Move, Not Domestic Fundamentals

The bid this morning is coming from overseas not from any improvement in U.S. supply and demand. European and Asian gas prices are running stronger and that’s pulling more U.S. LNG cargoes into the export market. When export demand picks up it pulls supply out of the domestic market and that’s the mechanism providing near-term support to futures.

The domestic picture is still bearish. Production is elevated, storage is healthy for this point in injection season and mild spring temperatures are keeping heating demand light. Those fundamentals haven’t changed and they’re putting a ceiling on how far this geopolitical bid can push prices.

Short-Term Outlook

The short-term bias is slightly higher as long as global risk stays elevated. But gains are going to be limited unless there’s an actual disruption to LNG flows or a meaningful shift in domestic supply and demand. This is a geopolitical pop in a bearish market, not a trend change.

More Information in our Economic Calendar.