For a third consecutive day, the June 15 natural gas contract attempted an early morning breakout above 2.824 weekly high resistance only to be repelled.
A slightly bearish EIA weekly storage report which came in at a 76 Bcf injection was 1 Bcf above the pre-report average guesstimate but this was enough to push the market back lower. Today's sell off was much less volatile than last week's post-EIA report rally with today loss coming in at a relatively mild 1.5% versus a 5% gain last week.
Storage continues to rapidly fill with storage currently estimated at 1,786 Bcf, 71.1% above last year's level, but 3.6% below the 5-year average. The current deficit relative to the 5-year average has now narrowed 5 straight weeks.
The latest 6-10 and 8-14 National Weather Service forecasts have moderating suggesting little weather related demand for natural gas during May. There are areas of heat such as in the western U.S. but most areas should be slightly above or below-normal which in May means very little in terms of either heating or cooling-related demand.
Today's sell off could be the start of a break to a new price back lower although key technical support (40 day moving average) held at today's 2.710 low for the June 15 contract. Roughly 1/3 of last week's gains have been erased with today's sell off.
The market will need to see further selling over the next few days or a case could be made that a post-winter low has been set. A breakout above this week's high at 2.824 basis the June 15 contract would likely signal a low is in place.
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