Natural Gas Market Insights: Weekly Analysis from Extreme Investor Network
Weekly Natural Gas Review
Natural gas futures have recently shown impressive resilience, closing strong above a pivotal support level at $3.538. If this momentum persists, we could see prices rallying towards a minor pivot at $4.062—an attractive target for traders looking for upward movement.
However, should the $3.538 support falter, we could experience a pullback to the 52-week moving average at $3.108. This moving average is a crucial indicator, influencing the long-term direction of the market, as depicted in our weekly charts.
Are Storage Trends Bearish or Already Priced In?
The latest EIA report showed a significant 107 Bcf injection for the week ending April 25. This figure surpasses the five-year average of 58 Bcf, implying that typical bearish responses to such builds may have already been absorbed by market participants.
Yet, it’s crucial to note that regional inventories remain strikingly below last year’s levels, with declines of 21.7% in the East and 24.4% in the Midwest. This inventory decline in key demand areas creates a nuanced situation as we move into the warmer months, potentially increasing risks for supply and pricing.
Will Weak Weather Demand Limit Further Upside?
Looking ahead to the week of May 1–7, national demand is forecasted to remain tepid, with many regions experiencing mild temperatures between 60°F and 80°F. While the Southern states may see localized cooling demands as temperatures flirt with the 90s, the overall mild weather detracts from robust residential and commercial gas burn. This limited demand is likely to act as a cap on meaningful price growth in the short term.
Is Structural Demand Offsetting Weather Headwinds?
Despite the weather-related uncertainties, structural demand from exports provides a necessary counterbalance. LNG feedgas flows have risen by 1.5% week-over-week, reaching 15.8 Bcf/d, bolstered by strong demand from both European and Asian markets.
Moreover, year-over-year growth in U.S. electricity output by 2.1% suggests that demand from the power sector could offset any weaknesses in residential usage. While dry gas production remains robust at 105.6 Bcf/d, rig count data—currently at 101—indicates that producers are displaying a disciplined approach towards production, rather than responding impulsively to short-term price fluctuations.
Could U.S.-Canada Trade Tensions Introduce Supply Volatility?
Amid these dynamics, traders are also closely monitoring potential trade tensions between the U.S. and Canada. A proposed 10% tariff on Canadian gas imports threatens to disrupt existing supply chains, particularly into the Northeast U.S., where Canadian imports play a critical balancing role.
Canada’s Prime Minister has hinted at reciprocal tariffs, heightening uncertainty in the market. Although these tariffs haven’t been enacted yet, the looming possibility of disrupted supply flows during peak demand periods presents an additional bullish risk factor, complicating the current well-supplied market scenario.
Final Thoughts
As we move through the week ahead, it’s clear that investors should remain vigilant. The interplay of storage trends, weather conditions, structural demand, and geopolitical factors such as U.S.-Canada trade relations will shape the natural gas landscape. Keeping a close watch on these factors will be crucial for making informed trading decisions.
At Extreme Investor Network, we provide in-depth, actionable insights to help you navigate the complexities of the market. Stay tuned for our continuous updates and analysis, ensuring you’re always a step ahead in your investment journey!