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James Hyerczyk
Natural Gas

Natural gas closed lower for the week, but the price action late in the week suggests buyers may have shifted their interest to a weather pattern that indicates warmer temperatures for early June. The market posted a potentially bullish closing price reversal bottom on Thursday after a successful test of a pair of former bottoms at $2.550 and $2.534. Furthermore, a weekly inventory build on the low side of estimates helped provide some support, but this is old news. The real focus for traders is the EIA report for June 6.

According to NatGasWeather, models are already showing added demand and early EIA Weekly Storage Report estimates have been reduced by 24 Bcf for the week-ending June 6.

For the week, July natural gas settled at $2.611, down $0.053 or +1.99%.

U.S. Energy Information Administration Weekly Storage Report

The EIA on Thursday reported a 100 Bcf weekly injection into U.S. natural gas storage for the week-ending May 17. Ahead of the release of the report, traders were pricing in a build of 104 Bcf, with estimates ranging from 99 Bcf to 112 Bcf. EIA data also showed a 93 Bcf injection in the year-ago period and a five-year average 88 Bcf build.

The EIA report also said that injections have topped the comparable five-year average every week since the season’s first net injection, recorded for the period ended March 29, EIA data showed.


Short-term Weather Outlook

According to NatGasWeather for May 26 to May 30, “Weather systems with rain, snow, and thunderstorms will continue across the West and Plains into next week with chilly lows of 30 and 40s. Texas to the Mid-Atlantic Coast will be very warm to hot with highs of mid-80s to 90s as unseasonably strong high pressure dominates, hottest with mid-90s over the Southeast. Mostly warm with 70s and 80s from Chicago to NYC but with occasional showers. Hot high pressure over the southern US will weaken mid-next week while a weather system tracks across the northern US with showers and modest cooling. Overall, demand will be moderate due to hot conditions over the southern US.”

Weekly Forecast

Natural gas traders are already zeroing in on the weather for the first week in June and the EIA report for the week-ending June 6.

On Friday, natural gas prices rose after producing a reversal bottom the previous session. The move may have been fueled by comments from NatGasWeather. The experts said that their midday Global Forecast System showed “impressive early season heat” for the southeastern United States from previous guidance. Holding back the rally, however, were forecasts for comfortable temperatures for Chicago to New York City.

Looking forward, bullish traders will be looking for further confirmation of heat the first week in June.

From a technical perspective, support is coming in at $2.554, $2.550 and $2.534. Resistance is layered at $2.609, $2.619, $2.632 and $2.641. Taking out $2.641 could trigger a breakout to the upside if the weather cooperates.

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