With updated data pointing to a production dip and thus exacerbating supply fears, natural gas futures were rallying to challenge the $6.00 threshold in early trading Tuesday. The May Nymex contract was up 26.7 cents to $5.979/MMBtu at around 8:45 a.m. ET.
Further adding to perceived bullishness in energy markets early Tuesday, May West Texas Intermediate crude oil futures were up $1.27 to $104.55/bbl at around 8:45 a.m. ET.
The early gains for natural gas futures coincided with updated pipeline flow data showing a notable drop-off in domestic production, according to EBW Analytics Group senior analyst Eli Rubin.
“Dry gas production pushed notably higher over the past three weeks, but pipeline flow monitors are oscillating wildly in estimations for early April flows,” Rubin said. “While any drop could vanish with late-cycle revisions, an early-cycle loss in nominations this morning — down almost 1.5 Bcf/d day/day — is contributing to this morning’s gains.”
If it lasts, this “unexpected blip” in supply volumes could spark a rally above the $6 level, according to Rubin.
In an indication of bullish sentiment in the market, traders “bought the dip” Monday to rally prices higher, NatGasWeather said.
“To our view, bulls have been in control the past weeks,” and this raises the possibility that “if $6 gets taken out, a short squeeze could ensue and lead natural gas prices higher than many might expect,” the firm said. “What could prevent a move over $6 is if U.S. production shows signs of increasing soon.”
Looking at overnight weather trends, projected demand for the 15-day outlook period remained unchanged day/day, with cooler temperatures during the April 16-19 time frame offsetting warmer trends for this weekend and next week, according to NatGasWeather.
“With U.S. weather patterns forecast to be seasonal to slightly bearish the next 15 days, we look to other reasons for why U.S. gas prices have been so strong the past few weeks,” the firm said.
Factors influencing prices include “a relatively bullish background state” amid storage deficits, as well as “seasonal buying on the expectation of a hotter-than-normal U.S. summer, strong inflation and major geopolitical issues due to the Russian invasion of Ukraine,” according to the firm.
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