SMC NatGas Weekly Summary

Summary for Week Beginning May 16, 2021

 

Current Situation

In our last report, dated May 9, we noted that the NYMEX natural gas futures market was resting about 3 cents higher than the previous week, at $2.958, after a week where the market opened about where it left off at $2.938. It then proceeded to set the low and high of the week at $2.900 and $3.00, respectively, early in the week before trading sideways within that range thereafter and closing the week just above the midpoint. From a seasonal standpoint, the week’s movement served to extend our currently ongoing, first upward wave of the pre-summer season another 3 cents. While we viewed bullish trends in storage and supply/demand as still favorable for more upside, we acknowledged that upcoming shoulder month weather, seasonal timing, and $3.00 resistance level may allow for an anticipated pullback phase first.

As to how the latest week turned out, the week opened about 1 cent higher than where it left off at $2.97 and initially fell back to test support with a low of $2.881 on Tuesday morning. With strong support around $2.88 holding, it reversed course and headed back up to as high as $2.988 before Thursday’s EIA storage report. The report was slightly bullish from an expectations standpoint, but with the supply/demand balance still looking tight, the market was able to struggle upward to extend our first pre-summer rally by about 1 cent, to $3.016 by Friday morning. In the same manner as the week before, the break above the $3.00 mark was unable to spark a more dynamic rally into the $3s and the market fell back to close the week at $2.961.

To summarize last week’s market activity, the prompt month natural gas futures contract opened the week about 1 cent above where it left off at $2.97 and fell to the low of the week on Tuesday morning at $2.881. It then rose to the high of the week on Friday morning at $3.016 and fell back somewhat to close the week only three-tenths of a cent above the previous week at $2.961.

Factors Affecting the Market — Summary

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

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 six weeks and has extended about 56 cents, from $2.453 to as high as $3.016 last Friday, May 14.

At this point, the supply/demand has, in fact, stayed tight for five straight weeks, and last week’s movement served to extend the highwater mark of our first upward wave 1 cent more, from $3.001 to $3.016, on Friday morning, May 14. We would note that despite another new highwater mark, upward momentum has flagged with only 3 cents in upward progress in the week ending May 7 and only 1 cent more this past week ending May 14. Considering seasonal timing, strong resistance at the $3.00 area, and that last Friday’s upward breach of $3.001 failed to spark a dynamic rally phase, we are inclined to look for our anticipated ‘good pullback’ phase to get underway early in the coming week. If we are right about being on this cusp, we’d look for a downward breach of $2.881 early in the coming week and a probable low of the pullback in the $2.70s.

As to the coming week, with the market unable to continue higher despite strong fundamentals, we would favor this as being an appropriate time and price level for our anticipated good pullback to commence.

 

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