Tight balances and weather maps blanketed in above-normal temperatures kept the heat on in the natural gas futures market heading into Wednesday’s session, with prices sharply higher in early trading. At around 8:50 a.m. ET, the August Nymex contract was up 10.1 cents to $3.731/MMBtu.
The futures market is coming off an “exceptionally volatile” session in Tuesday’s trading, according to analysts at EBW Analytics Group.
The August contract broke through resistance at $3.63 early in the session on “extreme heat and strong spot market demand,” the analysts said.
The front month then went on to break through resistance levels at $3.66 and $3.72, driven by a combination of “short-covering and programmed trading. Program traders then stepped in even harder, driving the August contract to $3.811 (a 21.8-cent rise) — after which the market quickly reversed, giving up nearly all of its gains.”
The recent “wild” price action could continue for now, according to Bespoke Weather Services.
Even after recent gains prices have the potential to keep climbing “until we see material loosening in supply/demand balances back at least closer to the five-year average, which likely would require a decent uptick in production to accomplish,” Bespoke said.
As for the latest forecast outlook early Wednesday, Bespoke said it made only a few adjustments to its projections, with the 15-day period still showing hotter-than-normal temperatures as a whole.
“The pattern continues a hotter focus in the western U.S….and also hotter spikes into the East, the past two days being a prime example of that,” Bespoke said. “The lower Midwest into the South remains the region void of anomalous heat, again similar to what we saw quite frequently earlier in June…Our lean moving forward remains in favor of the same general pattern type.”
EBW analysts said natural gas prices face conflicting signals.
Demand over the July Fourth holiday is expected to “fall sharply,” but recent model runs “have shortened the cool push to just three days,” they said. Forecasts still point to “three weeks of very hot weather” nationally following the holiday.
“The market might look past the holiday drop in demand, keeping prices high,” the EBW analysts said. “At least some profit-taking is likely, though, before the week ends.”
August crude oil futures were up 99 cents to $73.97/bbl at around 8:50 a.m. ET.
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June 30, 2021 at 08:03PM
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After 'Exceptionally Volatile' Session, Natural Gas Futures Surge Higher Early - Natural Gas Intelligence
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