Trade in the natural gas market this week has been quite impressive.
After most of the forward contracts fell to new all-time price lows in early trade on Tuesday, the market reversed back higher by the session's close.
Prices remained well bid during Wednesday and Thursday's sessions. But what really got my attention was market reaction following yesterday's EIA storage report which came in at the higher range of pre-report expectations.
The market briefly sold off after release of the weekly storage report but was able to climb back by the close settling up nearly .040.
Above-normal weather forecasts and a higher than expected weekly storage injection both failed to move the market lower which means trader focus has shifted elsewhere. And that focus is now on the blast of colder weather that has moved across much of the U.S.
The first round of winter heating demand has rallied the market higher in the face of otherwise bearish news. While setbacks are to be expected, the winter rally in the natural gas market looks like it has begun.
How high the winter rally takes the market will depend on heating demand for natural gas. But if winter forecasts prove correct, a rally at least back toward the 4.800-5.000 level is expected over upcoming months.
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