Late Natural Gas Market Commentary
From the
Chicago Mercantile Exchange:
Nat Gas futures prices rallied for most of Wednesday's trading session
on Colorado State University's prediction for an above average hurricane
season. In fact the spot futures contract once again worked its way to
the upper range resistance level of $4.16/mmbtu only to fail to breach
and settle above this level for the third time this week. This failed
attempt was after Tuesday's failure to breach the lower range support
level of around $4/mmbtu. By the end of Wednesday's trading session the
market shed about half of its intraday gains and settled in the middle
of the trading range.
Tomorrow will be a bullish EIA inventory
report if the actual data is in sync with the industry projection
calling for a net withdrawal of 21 BCF. However, it will not be as
bullish as the last few inventory reports and will likely be the last
net withdrawal from inventory for the current heating season. We are now
in the lower demand shoulder season and will remain in this pattern at
least into May… depending on when the temperatures start to move to
above normal levels.
I think the few surprises that have hit the
market (CSU hurricane prediction and Georgia Power coal plant shutdown)
have supported the futures market for all of this week. At some point we
will be moving to a more normal mode and when that happens I would
expect to see a modest round of profit taking selling and likely a
return to the $3.75 to $4/mmbtu trading range. I do not see any
substantial collapse in prices in the short to medium term nor do I see a
significant surge to the upside. The next major market moving event
will be the upcoming summer cooling season.
This week the EIA
will release its inventory on its normal schedule and time... Thursday
April 11th at 10:30 AM. This week I am projecting an average withdrawal
of 15 BCF from inventory and the last withdrawal of the season. My
projection for this week is shown in the following table and is based on
a week that experienced a modest level of above normal Nat Gas heating
related demand. My projection compares to last year's net injection of
11 BCF and the normal five year net injection for the same week of 15
BCF. Bottom line the inventory deficit will widen this week versus last
year as will the deficit compared to the five year average if the actual
numbers are in sync with my projections. This week's net withdrawal
will be supportive when compared to the historical data.
If
the actual EIA data is in line with my projections the year over year
deficit will widen to about 751 BCF. The deficit versus the five year
average for the same week will come in around 47 BCF. This will be a
bullish weekly fundamental snapshot if the actual data is in line with
my projection. The early industry projections are coming in a range of
-10 BCF to about a 50 BCF net withdrawal with the Reuters market
consensus projecting a net withdrawal of 21 BCF....
