SMC NatGas Weekly Summary
Summary for Week Beginning June 6, 2021
Current Situation
In our last report dated June 1, we noted that the NYMEX natural gas futures market was resting 8 cents higher than the previous week, at $2.986, after a week where the market first proceeded to gap lower through strong support at $2.881 and reach the low of the week on Monday, at $2.832. It then rallied back (with the help of Wednesday’s rollover to a higher-priced July contract) to reach the high of the week on Friday at $3.042. Looking ahead, we thought without mild temperature forecasts and another bearish storage report, we were more likely to see an upside reversal confirmed in the next week.
As to how the latest week turned out, early-week weather forecasts showed too much above normal temperatures in the 6-10 and 8-14-day timeframes, and so without bearish help from the weather, we did in fact see the upward reversal; market participants were able to muscle the market up to as high as $3.15 on Tuesday morning. Selling then set in ahead of the weekly EIA storage report with the market gradually dropping down to as low as $3.032, just before the report. It was able to fall a little further with a somewhat bearish storage report to as low as $3.01 on Friday morning, but late-day buying emerged to recoup most of the week’s losses and provided a weekly close at $3.097.
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 $3.044 and rose to the high of the week on Tuesday morning at $3.15. It then fell to the low of the week on Friday morning at $3.01 and recovered somewhat to close the week about 11-cents higher than the previous week, at $3.097.
Factors Affecting the Market – Summary
- Supportive: storage; supply/demand balance; oil; seasonal forces; tech considerations
- Neutral: cash; weather
- Negative: N/A
Conclusions
As to how pre-summer seasonal movement is turning out, looking at the daily continuation chart, 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 endured six weeks, covering about 70 cents to peak Monday, May 17 at $3.15. Subsequently, we saw a “good pullback” phase get underway in the form of a strong downward reversal off $3.15 that fell about 32 cents to reach at least a temporary low point of $2.832 on May 24. With last week’s pop back above $3.00 and continued upside that went to $3.15 on Tuesday, June 1, we now consider that the market concluded the good pullback phase at $2.832 and that it has embarked on a second upward wave that has been to as high as $3.15, thus far.
As to the specifics of our now ongoing second upward wave, we consider that it has now endured for about two weeks and has progressed as much as 32 cents. Movement is generally playing out in a stair-step manner, with each new upward push followed by a deep downward test to affirm support before embarking on the next upwardly progressive move. As such, last week’s movement featured a new upside to $3.15 on Tuesday followed by a test of support at $3.01 and then recovery on Friday to $3.121, to have the market poised for an attempt at additional new upside in the coming week.
As to the coming week, the NYMEX natural gas futures market is currently resting a little over 11 cents higher than the previous week, at $3.097, after a week where the market first proceeded to gap up to open at $3.044 and spike fairly quickly to a high of $3.15 on Friday morning. It then gave up all its weekly gains before finding support at $3.01 and recovering back to just above the midpoint late Friday. We again look for temperature forecasts and the Thursday storage report to be the main factors influencing the market in the coming week. As to all factors affecting natural gas futures, please see the summary box above.
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