Natural Gas Rally Stalls On Weather Forecasts
Today’s Spotlight Market
Natural Gas traders will once again be waiting eagerly at their computers for the release of the weekly Energy Information Administration (EIA) Gas storage report due out on Thursday at 9:30 AM Central Time. Traders are looking for another week of above normal gas injections, with the average analyst?s estimate of +112 bcf vs. the 5-year average of +88 bcf.
Fundamentals
It has been tough to be a Natural Gas bear this spring, as prices have been in a uptrend the past month or so, due mainly to below normal gas storage levels for this time of year. The brutal weather this past winter had forced power producers to draw down Gas inventories from storage, leaving current supplies nearly 40% below the 5-year average.
The National Weather Service Climate Prediction Center is calling for above normal temperatures for vast portions of the Central and Eastern portions of the U.S. in its 6 to 10 day weather forecast, although longer-term models are predicting more moderate temperatures for most of the U.S.? Warmer than normal temperatures in the coming days are expected to increase the demand for cooling, which may require power producers utilize increasing amounts of Natural Gas for use in power generation.
Speculators have generally been net-sellers of Natural Gas futures on the belief that increased production of Gas from shale formations would help to reduce storage deficits this spring when Gas is usually placed into storage. In fact, last week?s 119 billion cubic feet (bcf) gas injection into storage was above analysts? expectations, but gas inventories still remains 737 bcf below last year?s levels.? With power production accounting for nearly 1/3 of Natural Gas usage in the U.S., traders will certainly keep their focus on longer-term weather forecasts to help predict if increased power usage for cooling will keep Gas inventories well below normal going into the winter heating season.
Technical Notes – View Today’s Chart
Looking at the daily chart for July Natural Gas, we notice the recent price rally that began back in mid-May has stalled as prices approached the 4.750 level. Prices are currently trading above both the 20 and 200-day moving averages, although prices are still below the previous two market highs made back in April and February of 2014. Should the recent rally stall below these two key resistance levels, we may see the market sentiment turn bearish. The 14-day RSI has turned down and now reads a more neutral 50.38. The April 30th high of 4.877 is seen as resistance for the July futures, with support found at the May 30th low of 4.489.
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