Natural gas weekly summary

Mike Zaccardi, CFA, CMT

The bulls were in charge early last week, driving the May contract from $1.55 to $1.97 over the course of late in the prior week to last Monday. Resistance has been noted near $2.00, and the sellers took advantage by bringing natural gas prices back down to the $1.70s on Tuesday and Wednesday.

A storage report that was not far from analyst expectations brought about some selling pressure, and losses were compounded to end the work week on Friday – the prompt settled close to where it ended the prior week. Overall, the trading week was perhaps best characterized as ‘choppy’. This morning, the retreat from resistance continues, and the market is closer to the support area in the low $1.50s.

Looking at longer-term storage, the market is sharply above the year-ago levels and materially higher than the 5-year normal. Fall storage estimates are for inventories to be greater than the 5-year normal at 3.9 Tcf while early calls show perhaps weaker than usual storage this time next year due to lower supply. Dry production has been on the decline this year, and that trend will continue for the next 12 months in all likelihood as energy companies find conditions unprofitable for many existing wells due to low market prices.