The natural gas market pulled back from a 4-week price high reached on Monday closing down today for the first time in 6 sessions.
A rally which began early last week lifted the spot June 15 contract higher by 8.1% last week most of the gains (5%) coming in the one minute period last Thursday following release of the week EIA storage report.
There were several intraday rally attempts over the course of today's session but each held under yesterday's 2.821 high by the June 15 contract.
As resistance held, the market fell back toward 2.760-2.770 support later in the session which held keeping prices pinned near recent highs.
It is still questionable whether last week's rally was a short-covering squeeze of market shorts or the beginning a seasonal rally higher.
Outside of above-normal weather forecasts, much of the market news has been bearish with record high production and large storage injections over the past 4 weeks. And while weather forecasts call for above-normal temperatures, there is typically very little weather-related demand for natural gas during May as evidenced by the high storage injections.
The market may have gotten a little ahead of itself with last week's rally. Key to this assumption will be for the market to sell back off later this week. If it doesn't, it could indicate bearish factors have already been discounted into the market price.
Volume last Thursday was not particularly high which is typical of a short-covering rally. The next few days of trade will be very important in helping to gauge underlying strength in the natural gas market.
Today's latest 8-14 day forecast should be a catalyst tomorrow for higher prices if forecasts are truly what is behind last week's price surge in the natural gas market. If the market does not react accordingly, another sell off to new price lows could follow.
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