Coming off a sharp sell-off late last week, natural gas prices were largely neutral in early trading Monday as analysts noted only small adjustments to the outlook for weather and the supply/demand balance. The July contract was off 0.3 cents to $1.728/MMBtu at around 8:45 a.m. ET.
The forecast heading into Monday’s trading came in slightly cooler compared to Friday’s outlook, according to Bespoke Weather Services.
This week projects as “net cooler thanks to more influence from an upper level low stuck over the Mid-Atlantic and Southeast over the next few days, and also a little weaker warm surge late this week into the weekend once the upper level low moves away,” Bespoke said. “We do still see broad coverage of above normal temperatures late this month,” but they will be “more focused up north and out in the West as opposed to areas from Texas to the Southeast.
“So while an above normal demand regime, it is not as optimal of a setup as it would be if the South was more involved.”
In terms of balances, the firm said it observed “only marginal changes” in the latest data early Monday.
“We’ve still yet to recover any additional demand from the shut-downs, with industrial demand lagging,” Bespoke said. “We’d like to see this pick up to turn more bullish, though dips to $1.70 or lower could be bought.”
Natural gas prices continue to lack a clear direction, according to analysts at EBW Analytics Group. They pointed to range-bound trading for much of last week before a late sell-off Friday.
“This sell-off most likely was due to very weak cash prices, heading into a weekend with cooler-than-normal weather and a near-total collapse” in liquefied natural gas feed gas flows to the Sabine Pass, Corpus Christi and Freeport terminals, the EBW analysts said.
Cash prices could remain soft Monday but should “strengthen significantly” later this week as hotter weather approaches, they said.
“If feed gas flows can avoid further deterioration, prices could re-test last week’s highs by Friday,” the EBW team said. “If feed gas flows continue to drop, though, look out below!”
Looking at the technicals, ICAP Technical Analysis analyst Brian LaRose maintained a neutral stance on natural gas following Friday’s selling.
“Bulls needed to bust through $1.837-1.856-1.879 to open the door for a short-term levitation higher,” LaRose said. “Once again they could not get the job done. We will be watching to see if the bears can do any better with support to start the week. Still peg $1.710, 1.659-1.640, 1.595 and $1.519-1.521 as the obstacles they will have to conquer to get the spot continuation contract to fresh lows.”
July crude oil futures were down $1.38 to $34.88/bbl at around 8:45 a.m. ET, while July RBOB gasoline was off about 2.2 cents to $1.1021/gal.
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