May natural gas is expected to open unchanged Friday morning at $4.70 as a neutral technical picture offsets a supportive supply dynamic. Overnight oil markets were narrowly mixed.
Analysts see far greater risk to higher prices than lower ones. "From here, we expect some price consolidation between about [Thursday's] $4.67 lows and the approximate midpoint of today's range, roughly $4.74. Although our long-stated $4.80 target was achieved this morning, we will look for another run at this level by next week," said Jim Ritterbusch of Ritterbusch and Associates in closing comments to clients Thursday. "In short, we continue to advise working this market strictly from the long side while allowing for occasional price pullbacks of as much as 2.5-3% from most recent highs."
Ritterbusch had estimated Thursday's inventory build at 50 Bcf, just north of the 49 Bcf reported by the Energy Information Administration. "[Thursday's] stock draw was only a couple Bcf larger than five-year averages and kept the supply deficit north of 1 Tcf. We will continue to emphasize that upside price risk will continue to exceed that to the down side by at least a two-to-one ratio until sustainable deficit contraction against averages is seen. In the meantime, we will continue to suggest acceptance of profits out of any long positions on advances to above $4.80 while at the same time, advising fresh long positions on a scale down within the $4.60-4.70 zone in referencing the June futures."
It may be spring, but natural gas injections may be a little more challenging as heating loads are expected to be above normal. WeatherBELL Analytics in a Friday morning report said nationally in the six- to 10-day period, 41.9 heating degree days (HDD) can be expected, more than last year's 34 and more than the 30-year average of 36.7. In the 11- to 15-day time frame 33.7 HDD are on tap versus 27 for last year and a 29.6 average.
One weather model is projecting winter-like conditions. "The front five days has the strong trough diving through New England, [and] a major chill overtakes the Great Lakes into the Northeast, including the threat of snows into southern New England," said Joe Bastardi, a WeatherBELL meteorologist. "The GFS [Global Forecast System] is most ambitious, developing an accumulating snow in an area where people will have to be pumping their heating systems because of the wind and chill. This is more like something seen in March than the last weekend of April."
Market technicians versed in Elliott Wave and retracement suggest standing aside the market for now. Brian LaRose, an analyst at United-ICAP, said the market is "still stuck in neutral territory. Bulls need to breach $4.757-4.782-4.794 to open the door for further upside. Bears need to break $4.624-4.607 to signal a top is in place. Clear resistance, expect a march to $4.966-5.087-5.089. Take out support, expect a dump to $4.425-4.390 minimum. [We] suggest the sidelines until resistance can be exceeded or support can be broken."
In overnight Globex trading June crude oil rose 4 cents to $101.98/bbl and June RBOB gasoline fell fractionally to $3.0417/gal.