SMC NatGas Weekly Summary
Summary for Week Beginning May 23, 2021
In our last report dated May 16, 2021, we noted that the NYMEX natural gas futures market was resting three-tenths of a cent higher than the previous week, at $2.961, after a week where the market first proceeded to set the low of the week at $2.881 on Tuesday morning and then went on to set a new marginal high at $3.016 Friday morning before falling back to close the week one cent below where it started. From a seasonal standpoint, the week’s movement served to extend our ongoing, first upward wave of the pre-summer season another one cent. Looking ahead, with the market unable to progress much higher, despite strong fundamentals, we said we would favor this as being an appropriate time and price level for our anticipated pre-summer “good pullback” phase to commence.
As to how the latest week turned out, early-week weather forecasts continued to show a warmer pattern taking hold for late May and into June, and the market was able to gap upward by about 6 cents to open the week at $3.019, and instead of selling off this time, the new upside into the low $3s led to a good pop to as high as $3.15 on Monday afternoon. However, hedging and profit-taking appeared to set in Tuesday morning and the market came unglued; it lost all its gains with a drop all the way back to the low $3s and then down into the mid $2.90s before Thursday’s EIA storage report. It appeared that a steep drop in oil pricing at the same time contributed to the drop in natural gas. The Thursday EIA storage report bearishly reported injections of 11 Bcfs more than market expectations and helped to facilitate a market move lower through Friday, to $2.894, and a weak weekly close at $2.906. We consider that the week’s activity served to conclude our first pre-summer upward wave at $3.15 and would at least begin an anticipated “good pullback” phase. As such, the market is poised to challenge significant, four-week support at $2.881 early in the coming week.
To summarize last week’s market activity, the prompt month natural gas futures contract gapped up to open the week about 6 cents above where it left off, at $3.019, and rose to the high of the week on Monday afternoon at $3.15. It then fell to the low of the week on Friday morning at $2.894 and closed the week about 5 cents below the previous week, at $2.906.
Factors Affecting the Market — Summary
- Supportive: storage; supply/demand; oil; seasonal forces
- Neutral: cash; weather
- Negative: tech considerations
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 progressed about 70 cents and appears to have peaked last Monday, May 17, at $3.15. With a subsequent strong reversal to the downside, we now consider that the market has embarked on a “good pullback” phase, normally seen this time of year, which has extended about 25 cents thus far, down to as low as $2.894 last Friday, May 21.
In the May 16 report, we had looked for the pullback to be on the cusp of getting underway, and with our thoughts that it would likely begin from around its then-current $3.016 high, we looked for it to last one to three weeks and downwardly breach $2.881, perhaps achieving a low in the $2.70s. With it starting from a higher level and having not quite yet breached the $2.881, we are not as optimistic that it will reach the $2.70s without the help from some mild forecasts and higher than expected storage withdrawals.
As to the coming week, the NYMEX natural gas futures market is currently resting a little over 5 cents lower than the previous week, at $2.906, after a week where the market first proceeded to gap up just above $3.00 and then spike to a high of $3.15 on Monday afternoon before giving up all its weekly gains and more to close the week just above key support at $2.906. Looking ahead, with such a downside reversal mark on the charts, the market looks set to test significant support at $2.881 right away in the coming week unless we see significant bullish shifts in weather forecasts.
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