SMC NatGas Weekly Summary
NatGas Summary for Week of April 18, 2021
Current Situation
In our last report dated April 11, 2021, we noted that the NYMEX natural gas futures market was 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 appeared to be a challenge of the March 18 low of $2.422.
Seasonally, we said that this downward progressing movement served to form the final two swings of winter seasonal movement that we had anticipated. Looking ahead, we thought movement favored another downward attempt at $2.422, early in the coming week and said we would be watching for a sharp upward reversal to signal that the low of this second winter decline swing had concluded. We looked for the supply/demand and weather as being the most influential factors on the market.
As to how the latest week turned out, early-week 6-10-day and 8-14-day temperature forecasts were decisively locked onto a cool regime for the back half of the month, which appeared to help support some sharp upside movement to a high of $2.666, before the storage report. The storage report then came in bullishly showing six Bcfs fewer injections than expectations, and along with a tighter-looking weekly supply/demand indicator, the market continued higher, to $2.70 on Friday, with a strong weekly close at $2.68. From a seasonal standpoint, such sharp upside progress served to signal that the second winter decline swing had concluded at $2.453 on April 6 and that a first rally wave of the pre-summer season had become operational.
As to the seasonal big picture, we can finally put the wrap on the January-March winter season in which the overall historical tendency is for decline. While there was some doubt arising as to whether we would get all four of the market swings we anticipated, we consider that the upwardly biased movement of late March formed the third swing, with a high of $2.688; the sharp decline thereafter formed the final fourth swing that bottomed at $2.453, on April 6. With last week’s sharp rally off the $2.453 mark, we consider that we have transitioned into the first upward wave of the April-June, pre-summer timeframe when the overall tendency is for recovery.
As to this new pre-summer season, we look for a first upward wave to peak in very late April or May, a good pullback, and then a final wave upward, peaking in June. Whether the first or second upward wave is the highest would depend on how July heat is shaping up and how the supply/demand is trending. (See “Seasonal Forces” section for more detail on the pre-summer timeframe).
To summarize last week’s market activity, the prompt month natural gas futures contract opened the week about where it left off, at $2.53, and fell to the low of the week on Tuesday morning at $2.529. It then rose to the high of the week on Friday morning at $2.70 and closed the week strong on Friday, about 15 cents higher than the previous week, at $2.68.
Factors Affecting the Market Summary
- Supportive: storage; seasonal forces; weather; oil; tech considerations
- Neutral: supply/demand balance; cash
- Negative: n/a
Conclusion
As to how winter seasonal movement has turned out, the timing of this year’s winter cold caused movement to 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. While we began entertaining the idea that we would only have those two swings, we ended up with the final two swings after all.
As to the coming week, the NYMEX natural gas futures market is currently resting about 15 cents higher than the previous week, at $2.68, after a week where the market sharply reversed from a low of $2.453 on April 6 and has now engaged in a fairly concerted upside that we consider being the first pre-summer seasonal rally wave. We generally look for this wave to move at least somewhat higher and into at least late April or early May. We still look for the supply/demand, as indicated in the EIA Storage Report, and weather as being the most influential factors. As to all factors affecting natural gas futures, please see summary box above.
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Disclosure: The risk of loss in trading futures and/or options is substantial. Past performance is not indicative of future results. The information in this message derived from third-party sources is believed to be accurate and reliable; Coquest does not guarantee the accuracy or completeness of the information. Opinions expressed in this material are subject to change without notice. This report should not be interpreted as a request to engage in any transaction of futures, options, and/or OTC derivatives. The information contained in this material is not to be relied upon in substitution for the exercise of your independent judgment. Seek independent financial, tax, legal, and accounting advice from your own professional advisers, based upon your particular circumstances.
