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James Hyerczyk
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Natural Gas

Natural gas futures are trading higher in the extended session after recovering from an early morning setback that drove prices to their lowest level since April 27. If the market can hold on to its gains, it will once again put it within striking distance of the psychological $3.000 level and its May 4 top at $3.001.

At 20:00 GMT, June natural gas futures are trading $2.955, up $0.023 or +0.78%.

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Weak weather-driven demand may have been the biggest contributor to the early session weakness with some analysts saying it could take three weeks for summer cooling demand to kick in. Additionally, some analysts anticipate substantial storage increases in May.

The late session rebound in prices may have been fueled by a slight tweak to th weather forecasts, but we won’t know what caused the intraday short-covering rally until after the close.

New Weather Forecasts Lean to the Bearish Side

NatGasWeather said before the opening on Tuesday that after cool temperatures fade by next week, it could take a couple more weeks for consistent heat to arrive and usher in the summer cooling season. This could result in relatively modest demand for natural gas over most of May.

Over the weekend, both the domestic and European weather models shed modest degree days, keeping the five- to 15-day forecast “bearish weighted since comfortable temperatures will rule large stretches of the U.S., resulting in what’s expected to be light national demand, the forecaster said.

The “first opportunity for more intimidating heat to show up in the weather maps won’t be until the last week of May,” NatGasWeather said. “To our view, the longer it takes for heat to show up in the maps, the more likely the natural gas markets will get impatient waiting. We continue to expect a hotter-than-normal summer over much of the U.S.; it’s just not expected to arrive for another two to three weeks.”

As a result, the firm said it anticipates the “largest weekly builds so far this year” with U.S. Energy Information Administration (EIA) storage reports in May.

For a look at all of today’s economic events, check out our economic calendar.
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