Natural gas futures are trading sharply lower and on the bearish side of the key technical retracement zone that has been providing support earlier in the week. For days, buyers were trying to establish a support base in an effort to hold prices in a range ahead of injection season, but today’s price action indicates that they may have given up on those efforts.
At 14:16 GMT, May natural gas futures are trading $2.683, $0.029 or -1.07%.
Traders tried to continue to hold the market in a range on Thursday, following the release of the weekly government report that was in line with expectations. However, today it appears traders have abandoned the long side and are liquidating positions. This trend could continue until the market reaches a value zone or the spring weather turns hot.
Short-Term Weather Outlook
According to NatGasWeather for March 29 to April 4, “Mild conditions will rule the Ohio Valley and East the next few days with highs warming into the 40s to 60s. It will be very warm across the southern US and Mid-Atlantic Coast with highs of 70s and 80s for light demand. The West and central US will see areas of rain and snow today, then becoming colder this weekend as strong cold shot sweeps through the lows of teens to 30s. The cold front will then push across the Great Lakes and East early next week for strong national demand. However, warm conditions with highs of 60s to 80s will gain across the country late last week. Overall, national demand will swing between moderate and high into next week.”
U.S. Energy Information Administration Report
Thursday’s EIA report showed a 36 Bcf draw for the week-ending March 22. This compares to a five-year average draw of 41 Bcf and a 66 Bcf pull recorded a year earlier.
Prior to the release of the report, Bloomberg was estimating a withdrawal of 29 Bcf to 54 Bcf. ICE futures were estimating a 32 Bcf withdrawal and the Natural Gas Intelligence model was predicting a withdrawal of 40 Bcf.
Daily Forecast
With the weather services indicating rapidly rising temperatures and limited cold shots in April, it looks as if we could have seen the end of the withdrawal season. Today’s price action may also be reflecting this conclusion.
Based on the current price at $2.691, the market is trading on the weak side of key resistance levels at $2.709 and $2.745. If downside momentum continues over the near-term, we could see an eventual break into the early February bottom at $2.592.