Making Monday the fifth consecutive day to close lower, the May natural gas futures contract settled at $5.509, down 10.1 cents after trading in a range from $5.50 to $5.70. The week started on uncharacteristically heavy volume as 85,318 contracts changed hands.
Summing up Monday’s futures market, Tom Saal of Commercial Brokerage in Miami, attributed the dime drop to fund selling. “I think last week was a textbook reversal pattern on the weekly chart,” he said. “When the market couldn’t get any kind of momentum back toward $6, funds came in and started selling.”
In addition to seeing support in the current $5.50 area, Saal said he expects support will also lie at the $5.40-5.41 level.
Tim Evans of IFR Energy Services, said, “The rebound in May natural gas futures so far has stalled at $5.70, into the failed support at $5.69-5.71 that functioned as more of an emotional pivot over the past week.”
Before May can look to conquer its $6.03 peak from April 12, Evans said opposition at $5.78-5.80 needs to be cleared. “Long-term resistance is projected for $6.25 and $6.50 if the market is able to break above the recent ceiling, with more time spent consolidating or correcting now adding to the importance of an eventual thrust higher,” he said.
On the downside, Evans said “We see further minor support in conjunction with failed resistance at $5.48-5.51 and again at the $5.396 uptrend line ahead of the $5.34 floor from March 25. The downtrend may not look all that dynamic, but all of the congestion between $5.70 and $6.03 certainly looks like a top.
Taking an early look at the Energy Information Administration’s storage report to be released Thursday morning, Evans said heating degree day accumulations for last week were slightly less than originally forecast. Because of this, he revised his projection upward to a 50-60 Bcf net injection, far outpacing the 38 Bcf five-year average build by a comfortable margin and further reducing the 57 Bcf year-on- five-year deficit.
“This week’s warmth will probably also have a larger impact on reducing heating demand than in creating early air-conditioning offtake, also boosting storage injections,” he said. “Without a turn in the weather outlook, we see prices continuing to erode.”
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