Natural Gas News: Storage Report Crushes Weather Rally in Natural Gas Futures

May Natural Gas Fades Into Expiration as Storage Crushes the Weather Rally

May Nymex Natural Gas spent last week caught between a short-lived weather pop and a bearish supply picture that was never going to let bulls run. By the end of the week ending April 24, the May contract slipped back toward the mid-$2.50s. Weather handed bulls an opening. Storage slammed the door.

Technical Outlook

The downtrend was reaffirmed last week when sellers took out the previous main bottom at $2.561. The move down to $2.495, a multi-month low, made $2.763 a new minor swing top.

On the downside this week, traders will be eyeing previous bottoms at $2.405 and $2.340. On the upside, short-covering buyers will have to recover previous key bottoms at $2.526 and $2.688 before they can even get a shot at the minor top at $2.763.

With traders facing expiration on Tuesday I don’t expect to see a change in trend, but with natural gas, you really never know. Time to move into the June futures contract anyway.

Weather Gave Bulls an Opening, Supply Took It Back

The week started with cooler forecasts across parts of the Midwest and East. That was enough to get traders interested. Heating demand expectations ticked up, production looked slightly lower early in the week, and prices moved higher for a few sessions. It felt like the bulls had something to work with.

They didn’t. Most of the country stayed in mild spring conditions, which is the worst possible setup for natural gas demand. Heating is done. Cooling hasn’t started. Total consumption stayed soft even with the cooler pockets, and that weather story ran out of road fast.

Storage Killed the Rally

The number that ended the week was a 100-plus Bcf injection, well above normal for April and one of the earliest large builds on record. I’ve watched this market for a long time and a storage print like that in April changes the conversation immediately. It told traders everything they needed to know. Supply is outpacing demand by a wide margin and the market is going to carry that weight for a while.

LNG export demand stayed solid and kept a floor under prices, but strong export volumes weren’t moving fast enough to offset what domestic production is putting into the system. The loose balance is winning that fight right now.

What I’m Watching

Rallies in May Nymex Natural Gas are going to get sold until demand shows up in a real way. That means either a clear shift toward summer heat or a meaningful drop in production. Neither is on the table right now. Storage builds should stay strong and that keeps the pressure on. The downtrend is intact and expiration Tuesday is unlikely to change that picture.

More Information in our Economic Calendar.