Natural Gas News: Weather-Driven Demand Supports Natural Gas Market Today

May Natural Gas Edges Higher for Fourth Straight Session but Downtrend Holds

May Nymex Natural Gas is pushing higher for a fourth straight session Monday but the move hasn’t put a dent in the steep three-month downtrend. In my opinion this rally is designed to alleviate downside pressure, not signal a trend change.

Last week’s low at $2.561 fell between a pair of longer-term bottoms at $2.622 and $2.561. Severely oversold conditions brought some buyers in who saw value at those levels. Shorts may have also covered when they saw limited selling pressure in that zone. Both groups contributed to the bounce without either committing to a new direction.

Technical Outlook

The main trend is down according to three metrics: the swing chart, a trend line and the 50-day moving average.

The near-term range is $2.888 to $2.561. Its 50% level at $2.725 is the first resistance. The next resistance is a downtrend angle at $2.835, followed by a main top at $2.888 and the 50-day moving average at $2.949. Additional resistance is the intermediate pivot at $3.025.

Buyers face a series of headwinds and any rally is likely to be labored. The market is likely to remain in sell-the-rally mode unless a fundamental event is big enough to support a bullish trend.

The best thing that can happen for bullish traders heading into the summer cooling season is for a support base to form, highlighted by a series of higher-tops and higher-bottoms. That pattern slowly removes the shorts and possibly sets up a heat-driven rally. But it takes time. Be patient.

Weather and Supply Tell Different Stories

Forecasts for April 22 through April 26 call for above-average heat across the Southeast and Midwest. That’s driving expectations for stronger cooling demand and shifting sentiment after recent weakness. It’s what pushed prices higher into the end of last week.

The supply picture tells a different story. US output is running near record levels above 111 Bcf per day with forecasts pointing to further increases. Inventories sit nearly 6% above the five-year average. That oversupply is a ceiling on any rally.

Global factors are offering some offset. Damage to Qatar’s Ras Laffan facility and reduced flows through the Strait of Hormuz are tightening LNG supply, which could increase demand for US exports. That’s a supportive factor but it’s a longer-term argument. It won’t override the domestic storage surplus this week.

Near term the bias is neutral to slightly bullish. The April heat should support demand but strong production and elevated storage are likely to cap the gains.

More Information in our Economic Calendar.