Natural gas prices moved back toward the upper end of the past 2 week trading range in today's session supported by colder near term forecasts, warmer longer term forecasts and general buying in most commodity classes.
The market is also supported by expectations that U.S. dry-gas production will continue to fall recent estimated at 70.7 Bcf per day by Bentek/Platts, down from 73.8 Bcf per day in February.
Buying interest also comes from coal to natural gas switchover during this upcoming summer with power generator demand forecast to exceed the 30 Bcf per day level in the U.S. for the first time ever.
Speculation is also lending support as funds have steadily built a long position over the past 6 weeks although this position did fall by 18% according to the Commitment of Trader's report released last Friday. The current fund long position is just above the 100,000 contract level but could continue to rise if the summer rally progresses.
Funds will likely continue to add on market weakness as investor interest seems to be turning toward the natural gas market for the first time in two years. Several notable hedge fund managers including Einhorn at Greenlight Capital have recently expressed bullish opinions regarding the natural gas market.
However, as stated many times before on this blog, current gas in storage which ended this past winter near a record high will likely reach another new all time high by the end of this year surpassing last year's 4,009 Bcf mark.
Storage is expected to outweigh lower production and increasing demand which should lead to, at least, a retest of the early-2016 price lows as support later this year.
Depending on how high the summer rally may take the market, a tradable position such buying puts could be considered to take advantage of the seasonal break later this year.
But longer term, weakness should be bought as a multi-year low is expected to be set sometime during 2016.
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