The natural gas market has rallied over .200 from the price low set on Monday. No market goes straight up or down particularly when investor confidence gets overly one sided such as it has toward lower prices in the natural gas market.
Today's EIA weekly storage report came in at a larger than expected 63 Bcf injection, 12 Bcf higher than the average analyst's pre-report estimate. A spike lower following release of the report failed to drop the May contract under 2.550-2.560 support. As support held, buyers came back in likely covering existing short positions as the market reversed back higher into the close.
There is a chance the market has set a post-winter seasonal low in this week's trade. But odds favor recent buying as short-covering which should be followed by renewed selling pressure. One of the hallmarks of a short-covering rally is for a near parabolic price rise in the face of a general downtrend. If this assumption holds true, the natural gas market should quickly sell back off, possibly as early as tomorrow.
Outside of a late winter storm system which means very little in April, weather-related demand for natural gas remains light as evidenced by today's larger than expected storage injection.
The market should remain weak for the next 3-4 weeks are the market carves out a seasonal low. The triangle patterns on the summer 15 and winter 15-16 strips point toward another .300-.400 of downside potential before a final low is set.
Once a low is set, it could be a multi-year price low for the natural gas market. Plan accordingly.
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