SMC NatGas Weekly Summary

Summary for Week Beginning May 9, 2021

 

Current Situation

In our last report dated May 1, 2021, we noted that the NYMEX natural gas futures market was resting about 20 cents higher than the previous week, at $2.931. This followed a week in which the market popped rather dramatically higher from Monday morning through Wednesday morning, to extend the high-water mark of our first pre-summer seasonal rally wave from $2.779 to $2.971. With bullish trends in storage and supply/demand, we viewed the market as being poised to break upward through the $3.00 mark.

 

As to how the latest week turned out, the week opened about where it left off, at $2.938, and engaged in some upwardly biased consolidation that went to as high as $3.001 Tuesday morning before the Thursday EIA storage report. While the report still indicated a bullishly tight supply/demand balance, the market failed to break above that early week mark of $3.001 and simply consolidated in the $2.90s. From a seasonal perspective, early-week market movement served to extend our first rally wave of the April-June pre-summer season by 3 cents, but Friday’s close just above the midpoint of the weekly range at $2.958 indicated a loss of upward momentum and opened the door to a possible pullback.

To summarize last week’s market activity, the prompt month natural gas futures contract opened the week about where it left off at $2.938 and fell to the low of the week on Monday morning at $2.900. It then rose to the high of the week on Tuesday morning at $3.001 and fell back somewhat to close the week about 3 cents higher than the previous week at $2.958.

Factors Affecting the Market Summary

  • Supportive: storage; supply/demand; oil; seasonal forces; tech considerations
  • Neutral: cash; weather
  • Negative: N/A

Conclusion

As to how 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 five weeks and has extended almost 55 cents, from $2.453 to as high as $3.001 on May 4.

At this point, the supply/demand has stayed bullishly tight, and last week’s movement served to extend the high-water mark of our first upward wave from $2.971 to $3.001 by Tuesday morning, May 4. However, there seems to be some hesitancy about going beyond the $2s before seeing whether the supply/demand balance can remain tight during the lowest demand period here in May. Market participants may also be leery of the tendency for a May market pullback and therefore perhaps waiting for the pullback to play out before adding to their position. As such, while we consider the more bullish supply/demand and growing year-over-year storage deficit to be conducive for an eventual upward break of the $3.00 area, we may see the anticipated pullback phase occur before doing so.

As to the coming week, as discussed above, while we view bullish trends in storage and supply/demand as still favorable for more upside, we may get an anticipated pullback phase first. We look for direction to be set early in the week. As to all factors affecting natural gas futures, please see the summary box above.

 

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