SMC NatGas Weekly Summary
Summary for Week Beginning March 21, 2021
Current Situation
In our last report dated March 14, we noted that the NYMEX natural gas futures market was resting 10 cents lower than the previous week at $2.60, after a week where the market initially recovered from the upper $2.60s to $2.734, only to have another surprisingly low weekly storage withdrawal flip the market back to the downside, with a new low of $2.584 to end the week. As such, the downward market swing that began from the $3.316 on February 17 ultimately extended another 10 cents and remained operational. Looking ahead, we again looked to the supply/demand (as indicated in the weekly storage report) to be the primary influence on the market with weather forecasts a secondary influence.
As to how the latest week turned out, the 6-10 day and 8-14-day temperature forecasts, as well as some private 3-4-week outlooks, remained pretty mild-looking, and so the market gapped down to open the week about 4 cents lower, at $2.558 and made it to as low as $2.478 Monday morning. After consolidating between $2.478 and $2.566, it continued even lower to $2.422 on Thursday morning. The Thursday EIA storage report was again bearish, but this time, the market recovered to end the week just below where it opened, at $2.535. It left a bullish hammer pattern on the weekly chart and looks poised for an upside reversal attempt in the coming week
To summarize last week’s market activity, the prompt month natural gas futures contract opened the week 4 cents lower than where it left off at $2.558 and rose to the high of the week on Tuesday afternoon at $2.566. It then fell to the low of the week on Thursday morning at $2.422 and recovered somewhat to close the week 6½-cents lower than the previous week, at $2.535.
Factor Summary
- Supportive: storage; oil; tech considerations
- Neutral: supply/demand balance; cash
- Negative: weather; seasonal forces
Conclusion
As to how January-March winter seasonal movement is turning out, we have seen two very distinct swings this January-March winter season. The first upward swing began off the December 28 low of $2.238 and peaked fairly late on February 17 after a $1.08 move to $3.316. The first downward swing began off the February 17 high of $3.316 and has now extended as much as 89 cents to as low as $2.422 last Thursday, March 18.
As to how much longer our downward swing will endure, we look for this swing to conclude at any time. The strong seasonal tendency is for a final downward swing of the winter season to conclude by late March or, at the very latest, very early April. In addition to this timing tendency, we would note that last week ended with some Friday recovery movement as opposed to the previous two weeks that saw the market close to the downside. We’d also note that both the weekly candlestick mark and Friday’s daily mark were bullish hammer patterns. As such, there are several indicators pointing toward an upward reversal getting underway early next week.
As to the coming week, the NYMEX natural gas futures market is currently resting 6½-cents lower than the previous week at $2.535 after a week where the market initially gapped down 4 cents to open the week at $2.558 and fell to the low of the week at $2.422 on Thursday morning, only to recover much of the week’s losses on Friday despite another bearish storage report. Looking ahead, seasonal timing and Friday’s market activity are making the case for an upward reversal, but the supply/demand and temperature forecasts should also still be strong influences. As to all factors affecting natural gas futures, see the summary box above.
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