Natural gas prices turned back lower in last week's holiday-shortened week as the spot April contract lost just over .100 or 5.3%. Selling last week follows a two-week rally higher from an 18-year low reached earlier this month which lifted the spot contract by 21%.
With the fundamental picture remaining largely bearish for prices, new lows later this year appear highly likely. But near term, the market may hold some surprises before a lasting summer top is set.
While storage is on track to end this winter at a new all-time high, this week's EIA storage report is expected to show a withdrawal following last week's 15 Bcf injection. End of winter demand in the eastern U.S. could be higher than anticipated potentially adding support to the market.
The funds are also back in with a net long futures position in natural gas jumping by nearly 50% in just one week's time. The current position estimated at 70,241 contracts as of the 03/22 close increased by 23,177 contracts (49%) from the previous week according to the Commitment of Trader's report released on 03/25. Funds may continue to add to long coverage on ensuing price weakness.
And finally, the seasonal price trend is supportive which over the past 3 and 5 years suggests continued upside strength before a summer top is set.
Longer term, a retest of the lows set earlier this year is expected later this year during the post-summer seasonal low. It is during this second seasonal break that a low price point for the year is typically set.
How soon the market reaches a summer high will depend on upcoming summer cooling demand and weekly storage injections.
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