After finding technical support last week, natural gas futures advanced in early trading Monday as analysts pointed to signs of stronger balances. The May Nymex contract was up 5.7 cents to $2.583/MMBtu at around 8:50 a.m. ET.
The gains in futures prices early Monday occurred amid recent indications of a stronger supply/demand balance for natural gas, according to Bespoke Weather Services.
“Running our storage model over the weekend shows us that the last few” U.S. Energy Information Administration (EIA) prints “have definitely signaled an improvement in the supply/demand balance, which we feel is the reason we have moved up,” Bespoke said in a note to clients.
However, cash prices will need to strengthen further in order for prices to continue to advance, according to the firm.
“We do feel it is safer to buy dips in the low $2.50s, should they come, as we were not able to sustain a move under that level even when the balance was clearly worse, so there seems little reason to do so now,” Bespoke said.
Last week natural gas prices “survived the assault” of downward pressure created by mild shoulder season temperatures, with the May contract finding “considerable support” in the mid-$2.40s area, analysts at EBW Analytics Group said in a research note early Monday.
“This week’s trading will be heavily affected by weather,” the EBW analysts said. “If current forecasts hold, cooler weather should arrive by mid-week and continue for much of the rest of the month. While space heating demand is expected to be only slightly above normal, this should be sufficient to lift both cash prices and futures.”
Still, “very strong” wind generation output recently could curb demand for natural gas-fired generation, and in absolute terms space heating demand is still “extremely weak,” suggesting “a bold move higher for natural gas may still be a few weeks off,” according to the EBW analysts.
As for the latest weather outlook, Bespoke said the model consensus shifted slightly cooler over the weekend. However, the firm did not make any major changes to its forecast compared to Friday’s expectations.
“This week brings about the cooler change from last week’s warmth, with elevated” heating degree days “in the middle of the nation, which spread east into this weekend, though parts of the South can actually see reduced demand” as cooling degree days “will run below normal in this pattern,” Bespoke said.
Meanwhile, looking ahead to Thursday’s EIA storage report, NGI’s model predicts an injection of 67 Bcf for the week ended April 9. That would compare with a 68 Bcf build recorded in the year-ago period and a five-year average injection of 26 Bcf.
May crude oil futures were up 70 cents to $60.02/bbl at around 8:50 a.m. ET, while May RBOB gasoline was up about 1.6 cents to $1.9785/gal.
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