Natural gas futures extended their recent rally in early trading Monday, drawing on a combination of technical momentum and colder March forecast trends. Coming off a 11.6-cent gain to close out last week’s trading, the April Nymex contract was up 15.0 cents to $2.698/MMBtu at around 8:40 a.m. ET.
Taking over as the new prompt month, the April contract is “benefiting from nascent technical momentum” and a “notable cold shift” in recent forecasts, EBW Analytics Group analyst Eli Rubin told clients early Monday.
In terms of technical factors, prices could be “primed for a robust run higher,” potentially riding “the tailwind of building momentum from a 48.4-cent rise from Wednesday’s intraday low,” the analyst said. Natural gas also crossed a “key technical inflection point at the 20-day moving average.”
It’s possible that “shorts may finally be taking profits (buying contracts to close positions) as the March weather outlook shifts colder,” Rubin said. “While natural gas appears fairly priced from a fundamental perspective, a technically driven jump higher may occur near-term.”
ICAP Technical Analysis pegged technical targets for the April contract at $2.593 and $2.717, associated with key retracement levels.
This pair of retracements represents the next major objective for bulls, according to ICAP analyst Brian LaRose.
If bulls can “get the job done to start the week…the door will be open for a run back toward, even above, $3,” LaRose said. “If they cannot, more congestion and/or a test of the $2 neighborhood by the April contract is still possible near term.”
Meanwhile, the latest forecast maps from Maxar’s Weather Desk Monday showed widespread coverage of below-normal temperatures during the 11- to 15-day period, from March 9-13. The forecaster noted divergence in the major weather models, with the European dataset notably colder than its American counterpart.
“The forecast aligns best” with the American model “in focusing below to much below normal coverage along the Northern Tier and in the West, while keeping the South on the warmer side through mid-period,” Maxar said.
Even though “models have been biased too cold of late,” the forecaster cautioned that “the Euro model is still a colder risk to the forecast even when accounting for average biases of the past 30 days.”
In the six- to 10-day time frame, from Saturday through March 8, Maxar observed a “buildup in ridging over the north Pacific into Alaska.” This is a feature that would “help to direct colder air into a trough over the North and West. Below and much below normal temperatures remain steady in the West while expanding to the Midwest late in the period.”
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February 27, 2023 at 08:59PM
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Technical Factors, March Chills Seen Lifting Natural Gas Futures in Early Trading - Natural Gas Intelligence
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