Natural gas futures continued to rally on supply concerns in early trading Wednesday, leaving market observers wondering when a pullback might arrive. The May Nymex contract was up 18.8 cents to $6.868/MMBtu at around 8:55 a.m. ET.
There are some signs that the rally in natural gas prices could run out of steam soon, according to EBW Analytics Group senior analyst Eli Rubin.
“The combination of yesterday’s bearish technical pattern and natural gas being overbought for a second week suggests that the Nymex price rally may soon fade,” Rubin said early Wednesday. “If bulls take profits and shorts re-enter the market, natural gas could correct sharply lower.”
Still, from a fundamental standpoint, there’s little standing in the way of $7.00 natural gas, the analyst added. Recent estimates showed gains in liquefied natural gas feed gas nominations and weaker production in recent estimates heading into Wednesday’s session.
“Further, with recent gains driven primarily by long-term undersupply concerns, any near-term pullback may be but a prelude to returning upward momentum in early summer,” Rubin said.
Bespoke Weather Services similarly observed bullish changes to the data on exports and production heading into Wednesday’s session.
“The market has essentially been a one-way train higher, regardless of day-to-day data changes, anyway, but this does keep alive the feeling that the path of least resistance remains to the upside, with a test of $7.00 still seeming inevitable,” Bespoke said. Market sentiment remains “skewed toward the idea that we are on track to run into potential problems with low storage levels later this year, barring a significant jump higher in production levels relatively soon.”
In terms of updated forecast trends, the six- to 10-day period (Monday through April 22) shifted warmer from the Midcontinent to the East in the latest outlook from Maxar’s Weather Desk.
“The revisions are especially during the mid to late period and are a result of more Pacific originating air flow ahead of a deepening trough along the West Coast,” Maxar said. “Still, below and much below normal temperatures are in the eastern half” during this time frame.
In the 11-15 period, from April 23-27, Maxar’s latest forecast for the eastern half of the Lower 48 also trended warmer compared to previous expectations.
“Below normal temperatures accompany a trough into the West during the early stages, but models then fade the features as it progresses toward Central,” the forecaster said. “…A round of above normal temperatures precede the trough in Central early and the East late.”
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April 13, 2022 at 08:16PM
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Natural Gas Futures on 'One-Way Train Higher' as Supply Concerns Persist - Natural Gas Intelligence
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