Does Natural Gas Rally Have Room To Run?
Today’s Spotlight Market
On Friday, June Natural Gas struggled to hold recent gains made following the smaller than anticipated Gas storage build last week. Thursday?s weekly release of the Energy Information Administration?s (EIA) Gas storage report showed a build of 111 billion cubic feet (bcf) last week. This was below the average pre-report estimate of a 117 bcf build and was deemed bullish by traders. For the year, Natural Gas inventories stand at 1,897 bcf, which is well above last year?s totals, but still 2% below the 5-year average. ?
Fundamentals
Energy traders saw not only a rebound in Crude Oil prices but also in Natural Gas,with the lead month June futures currently trading at its highest levels since late February. Right now most of the buying interest appears to be related to short-covering by commodity funds who are currently net-short over 244,000 contracts as of the most recent Commitment of Traders report. Going forward, the reduction in the drilling rig count could eventually curtail Gas production from the shale formations; however Gas production continues to increase, despite lower rig accounts according to data from the EIA. The final catalyst comes via weather forecasts, as we move closer to the start of summer cooling season. The most recent forecast from the Climate Prediction Center has an equal chance for above or below normal temperatures through July for the eastern 2/3rds of the country, with only the western 1/3 of the nation expected to see above normal temps as we move into the heart of summer.
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