Natural gas futures are trading higher on Friday, edging closer to a key technical level at $2.623 and this week’s high at $2.626. The price action suggests there may be more than just short-covering taking place. The move is particularly intriguing because on Thursday, the Energy Information Administration (EIA) reported an above-consensus and much larger than expected 123 Bcf weekly storage build.
At 09:22 GMT, June natural gas futures are trading $2.610, up $0.021 or +0.81%.
Although the EIA number was at the high end of the range of guesses, perhaps traders are disregarding the news because the prediction of a triple-digit injection had been telegraphed for weeks.
U.S. Energy Information Administration Weekly Storage Report
The EIA reported on Thursday that domestic supplies of natural gas rose by 123 billion cubic feet for the week ended April 26. That build compares to just a 50 Bcf build recorded in the year-ago period and a five-year average 70 Bcf injection.
Total stocks now stand at 1.462 trillion cubic feet, up 128 billion cubic feet from a year ago, but 316 billion below the five-year average, the government said.
Short-Term Weather Outlook
According to NatGasWeather for May 2 to May 8, “Weather systems with rain and snow will continue to impact the central and far northern US with slightly chilly lows of 20s to 40s. The Southern Great Lakes to Mid-Atlantic, and portions of the Northeast will warm into the 60s and 70s the next few days. The southern US will be very warm with 70s to lower 90s. Weather systems will track across the northern US this weekend and next week with showers and local cooling, most of the rest of the country will be warm highs of 60s to 80s, besides locally hot 90s across portions of the southern US. Overall, national demand will be low.
Daily Forecast
Technically, the market looks impressive. Earlier in the week, natural gas survived a few attempts to break it lower with each low falling well-above the best support zone target at $2.552 to $2.534. This suggests that buyers wanted it at prices above the value zone.
The key area to watch is $2.623 to $2.626. A sustained move over $2.626 will indicate the buying is getting stronger. If this move creates enough upside momentum then look for buyers to challenge the next target at $2.657.
The inability to take out $2.623 with any conviction and a sustained move under this level will signal the return of sellers. This could trigger a correction into the support or value zone at $2.552 to $2.534.