SMC NatGas Weekly Summary
Summary for Week Beginning April 11, 2021
Current Situation
In our last report dated April 1, we noted that the NYMEX natural gas futures market was resting about 8 cents higher than the previous week, at $2.639, after a week in which the market continued the upwardly biased consolidation of the previous week by extending the high-water mark about 5 cents — from $2.64 to $2.688. From a seasonal standpoint, we noted that the two-week recovery movement off the March 18 low of $2.422 had not been the sharp upward reversal that we normally see this time of year when market participants shift their focus from the end of winter to the upcoming summer demand. As such, we said we were not yet ready to put the final wrap on our January-March winter season and would give it one more week to see whether movement evolved into sharp upside or whether it dropped back to try to extend our late winter low point on March 18.
As to how the latest week turned out, the 6-10 and 8-14-day temperature forecasts continued to look very mild and the market initially opened about .05 cents lower, at $2.593, and headed notably lower to as low as $2.453 before Thursday’s EIA storage report. While it recovered a little to end the week after a neutral storage report, the big news is that the market concluded two weeks of upwardly biased movement and is, in fact, attempting to extend our late winter low point of $2.422. At this point, we are not yet sure if this final downward swing is complete or has somewhat further to go.
To summarize last week’s market activity, the prompt month natural gas futures contract opened the week almost 5 cents lower than where it left off at $2.593 and rose immediately to the high of the week on Sunday evening at $2.616. It then fell to the low of the week on Tuesday afternoon, at $2.453, and recovered somewhat to close the week about 11 cents lower than the previous week, at $2.526.
Factors Affecting the Market Summary
- Positive: storage; seasonal forces
- Neutral: supply/demand balance; cash; weather; oil; tech considerations
- Negative: n/a
Conclusion
As to how winter seasonal movement has turned out, because of the timing of this winter’s cold, we have seen winter seasonal movement play out in a delayed manner with the first upward swing not concluding until mid-February and the first downward swing not concluding until mid-March. This had us entertaining the idea that we would only have those two swings before a sharp upward wave of the new April-June pre-summer season got underway. However, last week’s downward movement was not the sharp upward reversal that typifies a transition to pre-summer movement, and with last week’s drop back to challenge the mid-March low, we have seen the formation of two more winter swings. As such, we can now count winter movement as follows: 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 89 cents, to $2.422 on Thursday, March 18. The second upward swing peaked on March 30 at $2.688 and the second downward swing reached a low point thus far at $2.453 on Tuesday, April 6. Again, it’s not that unusual for winter movement to extend into early April, and so we don’t consider these final two swings into early April to be anomalous.
Going forward, while we saw some late-week recovery off last week’s Tuesday low of $2.453, it wasn’t sharp or dynamic, and so we anticipate that there will be an initial attempt in the coming week to extend that $2.453 low point at least a little lower. Again, we will be watching for a sharp upward reversal to signal that the low of this second winter decline swing is in.
As to the coming week, the NYMEX natural gas futures market is currently resting about 11 cents lower than the previous week, at $2.526, after a week where the market abandoned two weeks of upwardly biased recovery movement and headed lower in what appears to be a challenge of the March 18 low of $2.422. We still look for the supply/demand (as indicated in the EIA Storage Report) and weather as being the most influential factors affecting upcoming market movement. As to all factors affecting natural gas futures, please see ‘Factor Summary’ above.
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