Yahoo Finance Natural Gas Price Fundamental Daily Forecast – Oil Price War Truce Could Trigger Short-Covering Rally
Natural gas futures are trading higher on Friday after hitting a multi-year low the previous session. Thursday’s weekly U.S. Energy Information Administration (EIA) storage report failed to move the needle much although most traders interpreted the report as bearish. The reluctance to short the market at current levels on bearish data suggests investors may fear being caught on the wrong side if Russia and Saudi Arabia agree to crude oil production cuts.
At 10:25 GMT, May natural gas futures are trading $1.578, up $0.026 or +1.68%.
Futures may be holding steady, but weakness prevailed in the spot market on Thursday with prices falling again due to forecasts for mild weather. Natural Gas Intelligence’s Spot Gas National Average fell 6.0 cents to $1.330.
U.S. Energy Information Administration Weekly Storage Report
The EIA reported Thursday that domestic supplies of natural gas fell by 19 billion cubic feet (bcf) for the week-ended March 27.
Estimates ahead of the EIA report ranged widely from a withdrawal as small as 16 Bcf to as large as 31 Bcf. Bloomberg analysts were looking for a 31 Bcf withdrawal. A Wall Street Journal survey called for a 26 Bcf pull and the Natural Gas Intelligence (NGI) model estimated a 10 Bcf draw.
Last year, the EIA recorded a 6 Bcf injection for the similar week, while the five-year average stands at a withdrawal of 19 Bcf.
Total stocks now stand at 1.986 trillion cubic feet (TCF), up 863 Bcf from a year ago, and 292 Bcf above the five-year average, the government said.
Short-Term Weather Outlook
According to NatGasWeather for April 2-8, “Warm conditions will continue across the southern US with highs of 70s and 80s. A cold shot with rain and snow will track into the Rockies and Plains today with highs of 20s to 40s, while mild elsewhere with highs of 40s to 60s. Warm versus normal conditions will build into the Midwest and East late this weekend through mid-next week with highs of 60s from Chicago to NYC for very light demand, while cool air shifts over the Northwest & Rockies w/highs of 30s to 50s. Overall, modest national demand through Friday-Saturday, then very light Sunday through Wednesday.
Daily Forecast
Yesterday’s EIA report indicates a lot of demand destruction. The price action suggests perhaps short-sellers had overdone it on the downside. Nonetheless, without any reasonable guesses about the duration of the coronavirus crisis in the U.S., we could be looking at further downside pressure once the mild short-covering subsides.
Bearish traders could also be watching the price action in crude oil, which posted its best one day gain in history. The move was fueled by bullish comments from President Trump, who said he brokered a deal between Saudi Arabia and Russia to reduce production. If the deal goes through then look for a sympathy rally in natural gas. However, gains are likely to be limited by lower demand.
This article was originally posted on FX Empire
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