SMC NatGas Monthly Summary Report
Monthly Summary Report — May 1, 2021
(This report serves as a combined Monthly and 5/2/21 Weekly Report)
In our April 1 monthly report, we were still primarily discussing the January-March winter seasonal movement to determine if we had been left with just two large market swings for that season or whether the market would finish forming the final two swings of the originally anticipated four swings.
As the month of April turned out, the upwardly biased consolidation at the end of March did turn out to be a third swing of the winter season as the market did fall off in the first week of April and effectively completed both the third swing at $2.688 and the fourth swing on April 6, at $2.453. Thereafter, the market embarked on a first upward wave of the new pre-summer season which has now extended about 52 cents, to as high as $2.971 as of this monthly report. We consider that the supply/demand balance had the most effect on April movement with a looser year-over-year balance initially being conducive to that final $2.453 low of the winter season, and now a tighter supply/demand the past three weeks being the driving force of the now ongoing first upward wave of the pre-summer season. (See “Conclusions” section for additional detail.)
On a continuation basis, the prompt month NYMEX natural gas futures contract opened the calendar month of April at $2.605 and fell to the low of the month at $2.453 on April 6. It then rose to the high of the month at $2.971 on April 29 and ended the month at $2.931.
Factors Affecting the Market – Summary
- Supportive: storage; supply/demand; oil; seasonal cycles; tech considerations
- Neutral: cash; weather
- Negative: N/A
As to how April-June pre-summer seasonal movement is turning out, we consider that the first upward wave of the April-June pre-summer season became operational with the sharp recovery movement off the April 6 low of $2.453. This first upward wave has now endured almost four weeks and has extended almost 52 cents, from $2.453 to as high as $2.971 on April 29.
At this point, we have now seen three EIA storage reports in a row indicating a much tighter supply/demand, and the market has been appropriately moving higher each week. Last week’s movement extended the high-water mark of our first upward wave by almost 20 cents, from $2.779 to $2.971. We would note that we have moved into that late April/May window when first upward waves tend to peak. As such, while it could top out at any time, the continued bullishness in storage and supply/demand is certainly conducive to further progress into the lower $3s.
As to the coming week, the NYMEX natural gas futures market is currently resting about 20 cents higher than the previous week, at $2.931, after a week where the market popped rather dramatically higher from Monday morning through Wednesday morning, effectively extending the high-water mark of our first pre-summer seasonal rally, from $2.779 to $2.971. We viewed the late week consolidation as setting up an attempt at the $3.00 mark in the coming week. Bullish trends in storage and supply/demand still look favorable for more upside. As to all factors affecting natural gas futures, please see the summary box above.
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