Natural gas futures continue to slide, as forecasts of mild weather outweigh the bullish sentiment resulting from high LNG exports.
May natural gas futures are trading lower on Tuesday, hovering just above its contract low at $2.160, reached on June 24, 2020. The front-month contract is at a 30-month low due to rising output and forecasts of mild weather.
At 15:30 GMT, May natural gas futures are trading $2.218, up $0.003 or +0.14%. The United States Natural Gas Fund ETF (UNG) is at $7.01, down $0.06 or -0.85%.
The mild conditions are expected to allow utilities to start injecting gas into storage at the start of April.
However, the amount of feedgas flowing to liquefied natural gas (LNG) export plants is forecast to hit a monthly record high in March, particularly after Freeport LNG’s export plant in Texas, which was closed following a fire in June 2022, returned to operation.
Despite the decline in prices, an increase in gas demand is forecast due to LNG exports.
Gas prices have experienced volatility this month, and so far this year, prices have fallen by 53%.
The US’s gas stockpiles were around 23% above their five-year average during the week ending March 17, and they were expected to end around 20% above normal during the colder-than-normal week ending March 24.
The main trend is down according to the daily swing chart. A trade through $2.789 will change the main trend to up. A move through $2.161 will reaffirm the downtrend.
The nearest resistance is a short-term 50% level at $2.478.
Trader reaction to $2.215 is likely to determine the direction of the May natural gas futures contract into the close on Tuesday.
A sustained move over $2.215 will indicate the presence of counter-trend buyers. This would also put the market in a position to form a potentially bullish closing price reversal bottom.
A sustained move under $2.215 will signal the presence of sellers. The first downside target is $2.161. Taking out this level will form a new contract low and indicate the selling pressure is getting stronger.
A close over $2.215 will form a closing price reversal bottom. If confirmed, this could trigger the start of a 2 to 3 day counter-trend rally with $2.478 the primary objective.
James Hyerczyk is a U.S. based seasoned technical analyst and educator with over 40 years of experience in market analysis and trading, specializing in chart patterns and price movement. He is the author of two books on technical analysis and has a background in both futures and stock markets.