The market is currently testing its 50% to 61.8% retracement zone at $2.706 to $2.622. This zone is controlling the near-term direction.
Natural gas futures are edging lower shortly after the regular session opening on Monday with concerns over lower demand due to a rapidly improving weather picture continuing to weigh on prices. Losses, however, are being limited perhaps by improving demand for liquefied natural gas (LNG).
Additionally, there is still some confusion over whether last week’s bearish Energy Information Administration (EIA) report represents a new trend or a “one and done” event. Furthermore, there are also some new worries over increased production as Texas continues to recover from the Arctic freeze.
At 13:14 GMT, May Natural gas is trading $2.685, down $0.054 or -1.97%.
Short-Term Weather Forecast
According to NatGasWeather for March 8 to March 14, “Most of the U.S. will be mild to warm this week with highs of 50s and 60s across the northern U.S. and 60s to lower 80s across the southern U.S. Cooler exceptions will be over New England early in the week and across the West mid-week as weather systems bring showers. Cold air arriving into the Rockies and Plains early next weekend will spread south and eastward after with lows of 10s to 30s gaining in coverage for stronger demand.”
US Energy Information Administration Weekly Storage Report
The EIA on Thursday reported a 98 Bcf withdrawal from U.S. gas stocks for the week-ended February 26. Analysts were looking for a triple digit pull, so the report was deemed disappointing.
Working gas in storage was 1,845 Bcf as of Friday, February 26, 2021, according to EIA estimates. This represents a net decrease of 98 Bcf from the previous week. Stocks were 277 Bcf less than last year at this time and 178 Bcf below the five-year average of 2.023 Bcf. At 1,845 Bcf, total working gas is within the five-year historical range.
Liquefied Natural Gas Exports Continue to Recover from Texas Freeze
LNG export levels on Friday topped 11 Bcf, hanging near record levels after rebounding from the interruptions imposed by the Arctic storm and frigid temperatures that derailed the Texas energy sector in February, Natural Gas Intelligence (NGI) reported.
Although higher LNG demand combined with bullish weather forecasts could carry natural gas prices higher, all the bulls can hope for is a rise in demand to slow down the selling pressure at this time.
The main trend is down according to the daily swing chart. The next two swing bottom targets come in at $2.615 and $2.527. The main trend will change to up on a move through $2.916.
The main range is $2.352 to $3.060. The market is currently testing its 50% to 61.8% retracement zone at $2.706 to $2.622. This zone is controlling the near-term direction of the May natural gas futures contract.
Look for a bullish tone to develop on a sustained move over $2.706, and a bearish tone on a sustained move under $2.622. Holding between $2.706 and 2.622 will indicate trader indecision and possibly an early sign that momentum is getting ready to shift to the upside.