The natural gas market remains in a tight trading range between a high of $4.65 and a low of $4.50 for the prompt month. Traders are waiting for an updated storage report before making the next move.
The bigger question might be “What does summer have in store for us.” A cool summer will bring gas prices down with lower demand from power plants. I’d have to say that the cool start to spring might be making all the “bulls” and long traders have a second thought on demand for a hot summer.
During the past seven days natural gas has been as low as $4.22 and as high as 4.703. That’s over a 10% gain and from a technical viewpoint perhaps a bit overbought. There is obviously fear in the gas market that storage injections will not meet the needed amount of gas in the ground by next winter. With prices this high it’s sure to have power plants that can burn coal ….burning coal. For consumers we’ll need some early big injections to change the mindset of the “bulls.” I expect a pullback even if temporary as it’s time for this market to take a breather.
Natural-gas futures for May delivery (and most future months) surged 10.5 cents, or 2.3%, to $4.6910 a million British thermal units on the New York Mercantile Exchange. The market had been trading lower prior to the announcement as traders waited for the first increase of the year in stored supplies.
The U.S. Energy Information Administration reported the amount of natural gas in storage rose by just 4 billion cubic feet in the week ended April 4 to 826 billion cubic feet. Analysts had been expecting an average increase of 13.75 billion cubic feet, according to a survey of 20 analysts by The Wall Street Journal. The increase was less than half of the recent five-year average for the week.
With the weak first gain in stockpiles of the season, the market is questioning whether companies will be able to produce enough gas to have enough in storage at the start of the next heating season in the fall. Inventories are at the lowest level since 2003 after a severe U.S. winter prompted extraordinary demand for natural gas, which is used to heat more than half of U.S. homes. The EIA expects supplies to reach 3.422 trillion cubic feet by the end of October, which would be a nine-year low.