SMC NatGas Monthly Summary Report

 Monthly Summary Report — April 1, 2021

 

Current Situation

(This report serves as a combined Monthly and 4/4/21 Weekly Report)

In our March monthly report, we noted that we were still in the January-March winter seasonal timeframe and that a first upward swing was complete at $3.316 on February 17. A first downward swing was still in progress with a low thus far at $2.697 on February 26. With the continued tightness in the supply/demand balance, the market had pulled back about as far as we thought reasonable and thus looked for it to conclude at any time.

 

As March turned out, the weather remained very mild, and most importantly, the supply/demand proceeded to log four straight weeks of a looser-looking supply/demand balance than last year.  As such, our anticipated first downward swing stayed intact all the way down to a low of $2.422 on March 18.  With this first downward swing also playing out longer than anticipated, we began to favor the idea that we would only see these two large swings this year; an eventual rebound off the $2.422 low would simply be the start of a first upward wave of the new April-June pre-summer seasonal timeframe.  Because a last downward swing of the winter season often doesn’t conclude until very early April, this idea of just two swings is unresolved as of this writing as there are still a few days remaining in early April where a four-swing scenario could finish playing out.  (See the “Conclusion” section for additional detail.)

On a continuation basis, the prompt month NYMEX natural gas futures contract opened the calendar month of March at $2.80 and rose to the high of the month at $2.887 on March 3.  It then fell to the low of the month at $2.422 on March 18 and ended the month at $2.608.

Factor Summary

  • Supportive: storage; seasonal cycles
  • Neutral: supply/demand balance; cash; oil; tech considerations
  • Negative: weather

As for the winter seasonal movement, we have seen two very distinct swings this January-March winter season.  The first upward swing began off the December 28 low of $2.238 and peaked fairly late, on February 17, after a $1.08 move to $3.316.  The first downward swing began off the February 17 high of $3.316 and extended as much as 89 cents, to a low of $2.422 on Thursday, March 18.

Conclusion

In our last couple of reports, we cited the delayed and enduring aspects of these first two swings and leaned toward the idea that we would be left with just those two swings for the winter season.  That may still end up being the case, but we are noting that the two-week recovery movement that we’ve seen from the March 18 low of $2.422 has not been the usual sharp upward reversal that normally typifies the start of a first pre-summer upward wave.  As such, we are not yet ready to put the final wrap on our January-March winter season.  Basically, we think it possible that the upwardly biased consolidation that we’ve seen after the March 18 low could conceivably end up being a second upward swing with a subsequent second downward swing that bottoms in very early April.  As mentioned last week, we’ve seen final winter downward swings persist into early April in the past.  As such, we’ll give the market one more week to see if the upward biased consolidation of the past two weeks evolves into sharp upside movement or collapses into a final decline to challenge the $2.422 low.     

For the coming week, the NYMEX natural gas futures market is currently resting about .08 cents higher than the previous week at $2.639, after a week where the market continued the upwardly biased consolidation of the previous week by extending the high water mark about .05 cents, from $2.64 to $2.688.  Much of the gain was attributed to the rollover from the April contract to the higher-priced May contract.  Looking ahead, with another week of indecisive market movement, it appears that we could see a breakout in either direction in the coming week.  We still look for the supply/demand, as indicated in the EIA Storage Report, as being the most influential factor affecting upcoming market movement.  As to all factors affecting natural gas futures, please see the Factor Summary section above.

 

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